Currencies, stocks, and other securities are always changing in value over a period of time. The term volatility is used to judge the market condition.
What is volatility
Volatility is a statistical measure which reflects a size of changes in a security’s value. Besides, it is an important financial barometer, which determines an amount of risk when a trading instrument is used over a certain period of time.
Currency pairs with a low volatility are less risky as their values do not fluctuate dramatically. A high volatility means that a market price can change greatly over a short period of time in either direction.
The average volatility calculator is represented on this web page. The calculator makes it possible to assess a price volatility of a particular currency pair for a certain period. The list includes major, exotic, and cross currency pairs. A calculation is based on an intraday change in pips and percent according to a certain time frame from 1 to 52 weeks.
The volatility calculator helps traders evaluate the degree of their investment risks.
What does a time frame affect
Traders should be aware of a normal or average volatility for every currency pair. The calculator enables traders to measure a standard volatility for different time frames as well as deviations from an average level. Thus, traders can recognize a favorable period for trading.
When setting a time frame, it would be wise to consider the following remark. On the one hand, if you enter more data, you will get more accurate calculation. On the other hand, too “old” data can be unimportant to make a forecast.
How to make calculations
All readings are reckoned by means of the average true range (ATR) indicator, which reflects market volatility. The essence of the ATR indicator is to measure an average range of a price change over a particular period.
Formula: Variation = Average (Higher — Lower)
Interpretation: Variation equals an average value of a difference between the highest and lowest prices of a currency pair over a particular period.
Market quotes for calculations are provided by InstaForex
, a reliable broker.