You have to define the period to calculate the average of the volatility. It could be interesting to trade the pair which offer the best volatility. The volatility calculated on this page is called Average true range ATR.
It is calculated by taking the average of the difference between the highest and the lowest of each day over a given period. For example, with this method, let's calculate the volatility of the Euro dollar over three days with the following data. The Highest - Lowest difference over the three days is pips, pips and pips, or an average of pips. We will say that the volatility over the period is pips on average.
The volatility is used to evaluate the potential for variation of a currency pair. For example, for intraday trading, it may appear more interesting to choose a pair which offers high volatility. Another use may be as an aid to fix the levels of objective or stop-loss, to place an intraday objective at 2 or 3 times the volatility may be a risky strategy; conversely, one may estimate that an objective of at least one times the volatility has more chance of being achieved. I wish to buy the Euro Dollar for an intraday trade at 1.
My objective is pips. At the time when I want to open my trade, the low point for the day was 1. Now my objective is 1. In this case, my analysis shows that the EURUSD seems likely to have a stronger variation than on the previous days; I can open my position and maintain as my intraday objective 1.
However, if the rate shows no exceptional variation one may estimate that the objective will probably not be achieved during the day, which does not invalidate my analysis but defers my timing. Test our partner's services and trading platform with a free demo account during 30 days. More information Try on. Forex Trading tools Forex Volatility.
For example, with this method, let's calculate the volatility of the Euro dollar over three days with the following data First day: The Euro Dollar marks a low point at 1.More...