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Myles

What is volatility in a Forex market?

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Hello Myles,

Volatility determines how often a currency's value will change. A coin may be highly volatile or less volatile, depending on the extent to which its price will drift from the standard value. When a currency is more volatile, then the risk of trading with it is also high. This means that its price will also rise, therefore attracting more investors.
 It is hard to know whether a currency is volatile since, by nature, volatility is usually uncertain. 
Volatility may be either implied or historical volatility. Historical volatility is one that has already occurred, while implied volatility is an estimation of a traders' future expectations depending on the future price.
 You need to understand currency volatility to decide which currencies to trade and how you will trade them. 
Volatility will help you determine which currency pairs to trade with. 

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