Volatility in forex trading is an essential factor that you must learn. It is especially when you want to get a lot of profit from online forex trading. Some people said that it is the right time to trade. However, is it true?
Volatility in forex trading is a statistical calculation of the value of rising and falling prices that occur between the value of a stock or foreign exchange. This difference in value represents a market activity that directly impacts trading risk. It must be understood by traders.
Markets that have high volatility will cause faster price movements compared to markets that have low volatility. Volatility is not the same as risk. They are really different. In this case, volatility can be used to measure risk opportunities.
However, you cannot directly make it a benchmark as a source of risk in foreign exchange transactions. Actually the risk is the same; it's just that the impact of the risk is higher because the number of existing transactions is also large.
Volatility in Foreign Exchange
High forex market movements are usually dominated by GBP / USD, EUR / JPY, GBP / JPY, and EUR/USD. However, it is not absolute because sometimes a currency pair can have high volatility. It is influenced by many things that happened during trading.
It can be caused by economic and political turmoil or international issues that hit one or both of these currencies. This uncertainty that causes the movement tends to be high because only some parties can take advantage of this high opportunity with a high risk.
Meanwhile, if you refer to foreign exchange trading, volatility in forex trading is the frequency of trading that occurs in a period time. It affects the value of the pairs of foreign currencies traded. You must have the right strategies if want to grab more profits.
If you want to look for high profits, then trading popular currency pairs such as GBP/USD and EUR/JPN can be the best choice. It is due to the high level of volatility of the two pairs so that you can make large profits in a short time.
Measuring Volatility in forex Trading
There are several ways to measure the level of volatility of foreign currencies. Those are ranging from moving averages, Bollinger Bands, to Average True Range. All of these three measurements are used in charts to calculate the average of foreign exchange movements.
Like the Moving Averages, the movement is indicated by the distance of the candle from the average line. The farther the distance means the higher the level of volatility. Vice versa, price is stated to have high volatility when price fluctuations reach hundreds of pips per day.
Volatility is like a Double-Edged Sword
It is due to the high level of volatility of the two pairs so that you can make large profits in a short time. Don't forget that even though the profit potential is so high, the risk of currency going down can be drastic too.
That is why; this type of trading is known as high risk and high return. As an example at the beginning, the GBP / USD pair on May 3, 2019, experienced high volatility, which reached 135 pips in transactions at the best forex broker on that day.
The thing to remember from the meaning of volatility is the price movement used as a benchmark of the current market mood. The value of transactions that is popular with certain types of stocks or foreign exchange pairs. Join Didimax forex broker to start your journey.
In addition, fundamental analysis can also affect the value of buying or selling quickly. To be ready for everything, choose a great broker like Didimax is highly recommended. You can face the volatility in forex trading much better than other traders.
