The Most Volatile Currency Pairs And How To Trade Them

The difference between trading currency pairs with high volatility versus low volatility

  1. Currencies with high volatility will normally move more pips over a certain period than currencies with low volatility. This leads to increased risk when trading currency pairs with high volatility.
  2. Currencies with high volatility are more prone to slippage than currency pairs with low volatility.
  3. Due to high-volatility currency pairs making bigger moves, you should determine the correct position size to take when trading them.

There are several ways to measure volatility

To determine the correct position size, traders need to have an expectation of how volatile a currency can be. A variety of indicators can be used to measure volatility like:

Traders can also look at implied volatility readings, which reflect the level of expected volatility derived from options.

Key things traders should know about volatility:

  • Big news events like Brexit or trade wars can have a major impact on a currency’s volatility. Data releases can also influence volatility. Traders can stay ahead of data releases by using an economic calendar.
  • Volatile currency pairs still obey many technical aspects of trading, like support and resistance levels, trendlines and price patterns. Traders can take advantage of the volatility using technical analysis in combination with strict risk management principles.
  • Staying up to date with the latest forex pair newsanalysis and rates can help you predict possible changes in volatility. We provide comprehensive trading forecasts to help you navigate the market.
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Disclosure: DailyFX hosts daily webinars to answer questions and help traders prepare for volatile market conditions. ...

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