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Sep 25, 2008 at 04:29 o\clock

What is Volatility | ForexGen

by: forexgen_trade   Keywords: trading, currencies, indicates, volatility, money, liquid, fluctuation, transactions, forex, forexgen

Trading opportunities exist when prices fluctuate. If you buy a share for $2 and it stays there, there is no opportunity to make a profit. The magnitude of level of this fluctuation and its frequency is referred to as volatility. As a trader, it is volatility that you profit from. Large volume transactions and high liquidity combined with fewer trading instruments generate greater intra-day volatility in the currency market that can be exploited by day-traders. The high volatility of the currency market indicates that a trader can potentially earn 5 times more money from currency trading than trading the most liquid shares. Volatility is a measure of maximum return that a trader can generate with perfect foresight. Volatility for the most liquid stocks is between 60 to 100. Volatility for currency trading is 500.

In this respect, currencies make a better trading vehicle for day-traders than the equity markets.

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