what is volatility in forex

Volatility in forex trading refers to the measure of how drastically the prices of currency pairs change over a given period of time. When a currency pair experiences periods when its price fluctuates wildly up and down, sometimes unexpectedly, such a pair is said to have high volatility. Conversely, when a forex pair’s price is more stable with smaller price fluctuations, it is said to have low volatility. Understanding volatility is important for traders as it can shape their trading adventures. It can help traders decide if they want to jump in or sit one out. Volatility should always be taken into consideration when choosing position size and stop loss level. Some factors that cause volatility in forex trading include geopolitical factors, economic data releases, and central bank announcements. It is important for traders to be aware of which currencies are more volatile than others and when volatility is rising.