Adopting a cautious approach to leverage can mitigate negative impacts when navigating volatile markets. This is particularly important as leverage can amplify price fluctuations to exceptionally high levels, thus magnifying potential risks. Now you know more about Forex Volatility – The Most Volatile Currency Pairs, you could be ready to take your interest to the next level. However, by reading this article today, you’ve taken your first steps towards picking up the top volatile forex pairs.
EUR/USD Dives While USD/CHF Extends Rally
GBP/EUR is a matching of the British pound against the euro and, following Brexit, this pair has seen constant volatility. This is particularly true around any key policy announcements, or any crucial votes in the UK House of Commons. This is because the psychology of the market behavior in its most liquid form makes up the backbone of technical most volatile currency pairs analysis. If the liquidity of a trading instrument is lower, the validity of technical analysis comes into question. The fact is that various methods of technical analysis might not work in such situations. If you decide to trade, say, USD/SEK or GBP/NZD, your analysis may not work as effectively as, for example, when trading EUR/USD.
- 70% of retail client accounts lose money when trading CFDs, with this investment provider.
- Nevertheless, it is important not to overlook the risks posed by volatility; fluctuations may also result in losses if proper risk management techniques are not employed.
- However, some currency pairs tend to have larger price swings than others, providing greater potential for gains – and losses.
- This instability is evident as the lira has been losing its value since 2019.
- The US has been going through a period of political and economic turmoil, including the COVID-19 pandemic and the presidential election.
Which Forex Pairs Move the Most?
In contrast, the Japanese yen has long been perceived as a safe haven, with its worth increasing when signs of global instability occur. AxiTrader Limited is a member of The Financial Commission, an international organization engaged in the resolution of disputes within the financial services industry in the Forex market. If you wish to continue to the website, you do so confirming that you have made the decision independently, without solicitation by Axi and understand that you may not be able to open an account. Traders can also look at implied volatility readings, which reflect the level of expected volatility derived from options.
Monitoring forex markets
However, traders should be careful when trading with highly volatile currency pairs by reducing their position sizes. Volatility indicates how much and how quickly the price of a currency pair moves. High volatility means there are frequent and substantial price movements, while low volatility currency pairs have more modest fluctuations. Traders favor volatile pairs for short-term trading strategies like day trading and scalping, as bigger price swings allow for larger profit targets. However, high volatility also leads to increased risk, so managing that risk is crucial. That being said, there are a few things to bear in mind before opening a position on a volatile currency pair.
What are some strategies for trading volatile forex pairs?
As a result, the price of gold is highly dependent on the state of the dollar. FX markets are susceptible to a range of factors which affect their volatility, and many traders look to tailor their strategies to capitalize on the most volatile currency pairs. The least volatile currency pairs tend to be the major currency pairs which are also the most liquid.
Due to the political instability in Turkey, the Turkish lira (TRY) can be incredibly volatile on the global market. Its value against the USD has fluctuated hugely at key political moments, such as elections and coups. AUD/JPY’s volatility provides opportunities but hazardous volatility requires managing risk with care. Among US dollar pairs, the South African Rand (ZAR) has the highest volatility.
Less liquid currency pairs also tend to have a widespread, which increases the costs of trading for the forex trader. What makes AUD/JPY (Australian Dollar vs. Japanese Yen) an interesting currency pair is the inverse relationship between those two major currencies. The Australian Dollar tends to be in demand when traders have a risk appetite, while the Japanese Yen is a traditional safe haven currency people turn to in times of turbulence. The currency pair sees high volatility as it is highly sensitive to changes in market sentiment. The most volatile currency pairs can sometimes be hard to determine since volatility can impact different currencies at different times.
It entirely coincides with the time of economic data releases for the USA and New Zealand. It also confirms the thesis on volatility increase upon major financial data releases mentioned at the beginning. There are times when the currency price stands still or moves within a very narrow range.
Traders should keep up with financial news to make profits and avoid losses. So those are some of the most volatile pairs to trade, there can be a lot of profits in trading these pairs. Having said that, feel free to experience them on a demo account to get a feel for what it is like trading a volatile pair, you never know, it may be what is right for you.