FOREX Market Volatility, the Year That Was
The movement in the FOREX market continues to peak as suggested by the blog post of Adam Kritzer. This upward trend was observed after doing a careful study and comparison in the FOREX market for the past five years. In order to further understand this, actual range-based volatility was used instead of options-implied volatility.
USD index showing with its Normalized Average (N-ATR) indicator since 2001 serves as reference for Adam Kritzer’s remark. To obtain the actual range from this data, the N-ATR’s 14-period average must be taken. To do this, a high-low range is divided by the average closing price for this period. The result of which is a range expressed as percent of the average. This process makes market and timeframe comparison easier. Also, FOREX volatile movement changes among the pairs. USD index is greatly directed toward the Euro at 57.6%. This means that the volatility for the index will be near and in favor of EUR/USD pair. This is contrary to the data of a weekly USD/JPY index showing below average volatility. The USD/JPY index shows N-ATR falling below a five-year moving average. But, unlike that of the index detailed above, N-ATR in this data never reached 1.0%. The lowest N-ATR is that of 1.5%. It even got higher at the peak and is currently in the same level.
This is about the same case for a GBP/USD index. A higher low, higher high, and N-ATR’s average movement from 30% below of the high-low range, characterize this similarity to the USD/JPY index. Moreover, the N-ATR for this index is almost reaching the same point as that of the USD index.
The following are the important points of this observation that can be helpful in your trading and its development in 2011. First, the FOREX market’s volatility changes between pairs. Secondly, a fall in volatility does not occur in all pairs. This can affect trading in the New Year. Finally, N-ATR can serve as a guide in comparing volatility across pair leading to superior trading opportunities and assistance in allocating funds to various trade leaders.
nice article with good figures may this year remain same like the past .
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Alongwith currency pairs, gold also showed some real strong upward trend last year.
This is a good article on N-ATR usage to compare volatality between pairs.
ya it is and even this yrea it seems to be doing well.
Gold is relatively calm now. but I think it will rise once again bcoz of unending gold-buying race between some countries.
Stick to your rules
Thanks a lot for this information and currency market has been very volatile last year and even this year so far it continues to be the same .
EUR / CHF is moving in a very close ranks since September, and that due to the floor imposed by the NSB
I use the ADR on my charts, but don't really see it as particularly useful because small range days/weeks are often followed by large range days/weeks and vice versa. In deciding what pair to trade - when there is CB intervention then the range can be crushed or be unusual - eg: yen pairs last year, eur/chf pair recently - still tradable, but these tools are less useful.
I think gold is the best pair because there is very slow fluctuation and we should have to be more attentive and we can make 100's of dollar through it and i am just learning more and more about it .
Gold is hardly very slow. It suddenly slumps or boosts every month or so.
Eur/Usd is one of the best pair as i ever seen because whenever i trade i get some good profit and gold is also my favorite pair and i am just learning more about forex trading .