stability of the country whose currency is in play will also influence FX volatility. The degree of volatility is generated by different aspects of the paired currencies and their economies. It supports the thesis on the increase in volatility during major economic releases referred to at the beginning of the article. The main reason for volatility is liquidity. The volatility of a pair is measured by calculating the standard deviation of its returns. If this is the case, people say that there is a low volatility in the market. CAD/CHF.48.71, cAD/JPY.76.84, cHF/JPY.88.52, eUR/AUD 107.88.68, eUR/CAD.70.66, eUR/CHF.69.42, eUR/GBP.94.76. On the other hand, a risk-seeking trader would look for a currency pair with higher volatility in order to cash in on the bigger price differentials that volatile pair offers.
A pair of currencies - one from an economy thats primarily commodity-dependent, the other a services-based economy - will tend to be more volatile because of the inherent differences in each countrys economic drivers. However, such a high volatility is a result of low liquidity, and trading in low liquidity currency pairs carries particular risks for a trader.
As well, currencies not regulated by a central bank - such as Bitcoin and other cryptocurrencies - will be more volatile since they are inherently speculative. Spread of the EUR/AUD is usually more than 5-10 points; AUD/DKK (Australian dollar and Danish krone) is an exotic currency pair. Calculated over past Weeks, calculate, pair, pips. For example, a security with sequential closing prices of 5, 20, 13, 7, and 17, is much more volatile than a similar security with sequential closing prices of 7, 9, 6, 8, and. Lets take NZD/USD as an example to see how its volatility changes over time. You're probably familiar with the concept «volatility». Many traders are deterred by high spreads, up to 30 pips.
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