What is volatility?
When we discuss volatility, we are discussing how much a price moves over a certain period of time. In short, a more volatile market will move more frequently over a given time-frame, compared with a less volatile one. Now when we say that, we are talking about price movements, and that can be one of two things:
1. Proportional
2. Absolute
Both have their uses:
Namely:
- The proportionate measure is more useful for comparative purposes generally
- When we are specifically looking at currencies, it can be useful to talk in absolute terms
Measuring volatility is dependent on the time-frame you are focussing on. Which time-frame yields the most useful information will likely depend on what type of trader you are. You will be able to work out what works best for you through a process of trial and error, that's best served via a Demo trading account. We hope that this discussion of the most volatile currency pairs will help you to add another dimension to your trading.
A Final Word On Volatility
Any complete strategy will include rules for:
- Which markets to trade
- When to trade specific markets
- Position sizing
- Risk management
Knowledge of a market's volatility can help to inform your decision on all of the four points above - so it's important.
When we discuss volatility, we are discussing how much a price moves over a certain period of time. In short, a more volatile market will move more frequently over a given time-frame, compared with a less volatile one. Now when we say that, we are talking about price movements, and that can be one of two things:
1. Proportional
2. Absolute
Both have their uses:
Namely:
- The proportionate measure is more useful for comparative purposes generally
- When we are specifically looking at currencies, it can be useful to talk in absolute terms
Measuring volatility is dependent on the time-frame you are focussing on. Which time-frame yields the most useful information will likely depend on what type of trader you are. You will be able to work out what works best for you through a process of trial and error, that's best served via a Demo trading account. We hope that this discussion of the most volatile currency pairs will help you to add another dimension to your trading.
A Final Word On Volatility
Any complete strategy will include rules for:
- Which markets to trade
- When to trade specific markets
- Position sizing
- Risk management
Knowledge of a market's volatility can help to inform your decision on all of the four points above - so it's important.