The volatility in trading has a huge impact on the trading results because traders like to trade pairs that are volatile. 

That means they can enter into trade and be sure that there will be an opposite side to take the trade when they want to buy or sell a currency pair.

Low volatile pairs, like AUDUSD, are traded less and consequently the pip range is very low compared to the XAUUSD pair.

What is XAUUSD?

XAUUSD means Gold against U.S. dollars in foreign currency exchange. XAU is a combination of prefix X and AU which is a chemical sign of gold.

X is added in front of AU because of the ISO standard. If we do not put X in front AU then there can be confusion when using Australian Dollar which is written as AUD.

So, to differentiate between these two, AU and AUD, the X prefix is added before AU. XAU is also the ticker for the Spot Gold exchange.

XAUUSD Daily Pip Range

Pip range of a pair such as XAUUSD is the number of pips the pair have on a certain day. That means if you take the low and high price of XAUUSD on Monday and calculate the difference (High minus Low) you will get the number of pips for that day.

For example, if you have High = 200 and Low is = 50 then the difference between these two will be 200 - 50 = 150. That means the pip range for that day is 150 pips. 

Here is the average daily pip range of XAUUSD extracted from the market for the year 2020.

From January to December.

What is visible is that XAUUSD has a high average pip range which makes XAUUSD a very tradeable pair.

Each day you can expect that the pair will move more than 200 pips which is a high number. To make the comparison easy to understand here is the average pip range of EURUSD trading pair.

Now, you can see that EURUSD pair have around 80 pips on average per day. Compared to XAUUSD, 80 pips against more than 300 pips, we can say XAUUSD is more than 3 times more volatile than EURUSD.

How to Trade XAUUSD?

While XAUUSD is being volatile, there are some some benefits to trading the pair, but also danger because volatile pairs can easily change direction and activate stop loss.

If you put your stop loss too close it can happen that you end up with loss on your account. To avoid that problem it is good to put stop loss large enough in terms of pips, but maintaining the loss percentage acceptable to trading strategy.

That means, if you have stop loss set to 1% of your total account balance then you should adjust lot size accordingly. Making your account balance protected from large losses is one of the main aspects of good money management.

By adjusting lot size you can change the number of pips of each trade so it fits for the daily average. That means you can put stop loss with more pips, which will let the price have a wide pip range without activating stop loss on your trade.

Conclusion

What I'd like you to remember from this article is that XAUUSD is one of the most volatile pairs. Daily average pip range shows that you can have large pip movements and that you can be sure that pair will not be slow where you need to wait to find the opposite trader to make a transaction.

If you are a beginner in Forex trading what is good to know is that you should be very careful when trading XAUUSD. If you do not know how to set stop loss and lot size to protect your account, you should avoid this pair. It is better to use less volatile pairs like EURUSD or AUDUSD.

If you are an experienced trader then trading XAUUSD can be very profitable by trading it on a daily basis.

Anyway, as a last note I would like to say that each trader should know that trading with patience and discipline will lead you to success.

Photo by Dmitry Demidko on Unsplash