What are the Most Volatile Currency Pairs?

Due to their more dramatic price movements, the most volatile currency pairs offer enticing profit prospects. Despite increased volatility’s potential to generate profits, it can also increase a trader’s risk exposure.

In general, volatile pairs are affected by the same drivers as their less volatile counterparts. These include interest rate differentials, geopolitics, the perceived economic strength of each currency’s issuing country, and the value of these nations’ imports and exports.

Prior to opening a position on a volatile currency pair, there are a few things to keep in mind. The main thing to remember is that volatile currency pairs often have lower levels of liquidity than their less-volatile counterparts because not every trader has the appetite for risk to take a position on a volatile market. With a well-thought-out trading plan in place and a risk management strategy in place, theres little to fear in volatile currency pairs.

A definitive list of the most volatile currency pairs is hard to collate, chiefly because volatility can affect different currency pairs at different times. This is because of the previously-mentioned factors, which can cause the price of a currency pair to rise or fall. However, some currency pairs have had historically high volatility.

List of volatile forex pairs

  1. AUD/JPY
  2. NZD/JPY
  3. GBP/EUR
  4. CAD/JPY
  5. GBP/AUD
  6. USD/ZAR
  7. USD/KRW
  8. USD/BRL
  9. USD/TRY
  10. USD/MXN

What are the Least Volatile Currency Pairs?

The least volatile currency pairs are generally the majors. They are the currency pairs which have historically been the most popular among traders. These pairs include EUR/USD, USD/JPY, GBP/USD and USD/CHF.

Aside from these four ‘traditional majors’, most lists of major currency pairs will also mention a few commodity currencies such as AUD/USD, USD/CAD and NZD/USD; as well as some cross currencies including EUR/GBP, EUR/CHF and EUR/JPY.

How to Trade Forex Volatility

Two of the most popular ways to trade forex volatility – or volatility in general – is by opening a CFD or spread betting account. CFDs and spread bets are financial derivatives, meaning that they afford you the ability to go long to bet on the market rising, as well as short to speculate on it falling.

There are five simple steps that will help you get started trading forex volatility:

  1. Research which forex pair you want to trade
  2. Carry out analysis on that forex pair, both technical and fundamental
  3. Choose a forex trading strategy and check you’re comfortable with your exposure to risk
  4. Create an account and deposit funds
  5. Open, monitor and close your first position

Most Volatile Currency Pairs Summed Up

  • Volatile currency pairs can offer opportunities for quick profits
  • But, these profits sometimes come with an increased degree of risk
  • Volatile pairs often include at least one currency from a geopolitically unstable or less-developed country than the less volatile pairs
  • If traders don’t have a large appetite for risk, then the less volatile ‘major’ pairs might be of greater interest than the more volatile pairs

Source: IG

Be the first to comment

Leave a Reply