Volatility

Volatility refers to the degree of price variation in a currency pair over a given period, reflecting the speed and magnitude of market moves. High volatility creates larger price swings, offering greater profit opportunities but also higher risk. Low volatility results in tighter ranges, often preferred by range traders. Major economic releases, geopolitical events, and central bank announcements typically increase volatility sharply. Traders measure volatility using tools such as Average True Range (ATR) and Bollinger Bands. Adapting position sizing and strategy to the current volatility environment is essential for effective risk management.