Volatility is one of the most important characteristics of the Forex market, and although it can play against us, it can also be our best ally. For this reason, today we are reviewing how we can take advantage of this factor.
Forex: What is the short term trend of the Dollar’s price?
What is Forex Volatility?
In general, we can define volatility as the speed at which prices move, whether it be for an asset, commodity, index, currency, etc.
This concept is directly linked to market liquidity, which refers to the volume of transactions.
The more liquid a market is, the less volatility there is. If you have less liquidity, the exact opposite is true.
Forex is the largest market in the world, with a daily volume of over 6 trillion dollars. For this reason, it is not very volatile, if we talk about how difficult it is to see a significant percentage change in a Bitcoin Revolution currency.
However, currencies do tend to show drastic and sudden changes, as a result of their close relationship with geopolitical events,
To see a 2-4% variation in a currency like the Euro, which is one of the strongest, takes several weeks, and even months in a normal situation.Making money with these variations would be a difficult task if we do not have enough capital, and do not use a broker.
Besides, it’s rare that it moves that much percentage. Imagine you have only $500 worth of capital. If you spend everything on buying Euros, expecting this currency to increase by 4%, then by the time this happens, and you manage to exchange it back into dollars, you will have earned only $20.