The Most Volatility Currency Pairs and How To Trade Them

Forex markets can be affected by a variety of factors that affect their volatility. Many traders try to adapt their strategies to capitalize upon the most volatile currency pairs.

The Most Volatility Currency Pairs and How To Trade Them

Currency volatility, often measured by calculating the standard deviation or variance of currency price movements, gives traders an idea of how much a currency might move relative to its average over a given time period. A currency pair's true range can be used to gauge volatility. Alternatively, traders can use the percent spot range to measure volatility.

Higher levels of currency volatility mean higher levels of risk. Risk and volatility are often interchangeable terms.

Trading volatile currency pairs can offer traders higher potential rewards. Although, this increased potential reward does present a greater risk, so traders should consider reducing their position sizes when trading highly volatile currency pairs.

The major currency pairs EUR/USD, USD/JPY and GBP/USD are more liquid and less volatile than other major currencies. However, emerging market currency pairs such as USD/ZAR and USD/TRY can have some of the highest volatility readings.



Emerging Markets: USD/ZAR/USD/TRY, USD/MXN

Emerging market currencies are highly volatile due to their inherent risk. The chart below gives an example of how volatile emerging market currencies can be, which shows USD/ZAR (US Dollar/South Africa Rand) exploding nearly 25% higher in just over a month's time. You can find many other examples throughout history of emerging market currency pairs that swing dramatically like this.


Major currency pairs, which are also the most liquid, tend to be the least volatile. These economies are also more advanced and larger. This increases trading volume and helps to ensure greater price stability. It is not surprising that EUR/USD, USD/CHF, and EUR/GBP are among the most volatile currency pairs due to their high liquidity.

Below is an illustration of the average true range (ATR), USD/CHF. It ranges between 45 and 65 pips. This is a lower average true range than other pairs. One of many ways to determine the currency's volatility is by looking at its average true range. Bollinger Band width is another popular technical indicator used to measure volatility.

Correlation between two currencies can also have an impact on their volatility. A lower volatility might be due to a stronger correlation between two currencies. Continuing with our USD/CHF example, we note that the US Dollar and Swiss Franc are both viewed as safe-haven currencies.

When the market experiences periods of risk aversion episodes, the US Dollar and Swiss Franc tends to strengthen relative to their sentiment-linked peers. However, the currencies may not differ too much from one another. This helps to ensure that USD/CHF has a relatively low volatility.


When trading forex, traders must consider current volatility readings and possible changes in volatility. Market participants might also want to adjust their positions in relation to the volatility of a currency pair. A reduced position size might be necessary if you are trading volatile currency pairs.

The ability to recognize volatility can help traders decide the appropriate levels of stop loss or take profit limit orders. It is also important to know the characteristics that distinguish volatile currencies from low volatility currencies. Traders must also be able to assess volatility and be aware of potential volatility-causing events.

What is the difference between trading currency pairs that have high volatility and those with low volatility?

  1. Currencies with high volatility will normally move more pips over a certain period than currencies with low volatility. Trading currency pairs with high volatility can lead to higher risk.
  2. Currencies with high volatility are more prone to slippage than currency pairs with low volatility.
  3. Due to high-volatility currency pairs making bigger moves, you should determine the correct position size to take when trading them.

There are many ways to measure volatility

The expectation of currency volatility is essential for traders to determine the right size position. There are many indicators that can be used in order to measure volatility, such as:

  • Average true range (ATR).
  • Donchian channels.
  • Moving averages (by comparing the moving average to the current price).

Traders can also look at implied volatility readings, which reflect the level of expected volatility derived from options.

The following are key points that traders need to know about volatility

  • Volatility can be affected by big news events such as Brexit and trade wars. Volatility can also be affected by data releases. Traders can stay ahead of data releases by using an economic calendar.
  • Volatile currency pairs still obey many technical aspects of trading, like support and resistance levels, trendlines and price patterns. Traders can take advantage of the volatility using technical analysis in combination with strict risk management principles.
  • You can predict volatility changes by staying up-to-date with forex pair news, rates and analysis. We provide comprehensive trading forecasts to help you navigate the market.
  • DailyFX hosts daily webinars to answer questions and help traders prepare for volatile market conditions.
  • Supplement your forex learning and strategy development with the DailyFX Education Center.

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