Most volatile currency pairs Binary Options

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Most volatile currency pairs

In our last article we covered market hours & schedules, not lets talk about volatility in binary options trading.

What is Volatility?

In currency trading, volatility refers to the range of changes in value of a currency pair within a certain amount of time. When the range is high, a currency pair is deemed to have more volatility, while a currency pair is deemed to have low volatility when the range is low.

There is no widely accepted level above and below which a currency pair is thought to have high or low volatility (although the EUR/USD pair is used as a benchmark, since it occupies a central position between the highest and shortest ranges). Usually, volatility of currency pairs is used as a relative measure to compare currency pairs, than a definite measure.

How does Volatility affect Trading in Binary Options?

Amongst the long list of assets traded in Binary Options, currency pairs are a popular bunch. Consequently, the volatility of a trade pair and its average pip value influences what strategy a trader uses. Therefore, while some traders may yearn for volatility, others may shy away from it.

What makes Volatility Desirable in Binary Options?

Binary Options is also referred to as Single-payment options trading because of the nature of trading positions taken. Clearly, with a volatile pair, a trader can take high-value positions without falling out-of-the-money, thereby making huge gains. With increasing volatility, the positions can be higher and more positions can be taken.

It is important to exercise caution. As is the case with leverage, high volatility can lead to quick monumental losses if the market goes against your position.

What are the Most Volatile Currency Pairs?

The volatility of currency pairs is not static. Because the average daily trading range (in Pips) of currency pairs are measured annually, the relative position of currency pairs in an organized chart fluctuates.

Therefore, it is best to describe the most volatile currency pairs in terms of how often they appear high up in the chart, than at what level they appear in a specific annual duration.

With this in mind, the three most volatile currency pairs, in no specific order, are:

The other two currency pairs making the five most volatile currency pairs list are GBP/CHF and EUR/JPY.

For comparison, the three least volatile currency pairs are NZD/USD, EUR/GBP, and EUR/CHF.

The best currency pairs to trade

As most binary options traders know, binary options trading can use currencies as an underlying asset choice. The trading of currencies in the binary options market is a lot easier than trading directly on the Forex market. The opportunity to trade currency via the binary options market offers traders several benefits, such as:

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  • Access to the largest financial market in the world
  • Sufficient liquidity
  • Trading of various currencies around the clock
  • Knowledge of exact income on in-the-money trades
  • Simple risk management

One very interesting concept is to melt forex with binary options trading – meaning that you can take advantage of both trading techniques and fully exploit the market potentials. One broker that does a very good job in this regard is IQOption. Their trading platform is superior to anybody elses. You can drop up to 9 charts of currency pairs on one screen and work with different indicators for each. It’s best to take a look for yourself. If binary options is interesting to you you have to check out this broker.

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This raises the question then of what is the best currency pair to trade. This is not so easy to answer, because each currency pair has its own personality, and every trader also has his or her own personality.

Essentially, deciding upon the best currency pair to trade is simply a matter of finding your own personal advantage in the market. Moreover, it of course also depends on what time of day a trader prefers to trade . For example, those who wish to trade in Asian currency should choose Yen currency pairs, even though the GBP/USD is a more popular currency pair to trade .

Here are some additional currency pair trading tips.

EUR/USD

The EUR/USD currency pair has the highest order flow and thus the best liquidity in the entire forex market. You need not be afraid of possible slippage (with few exceptions), and your trades will always be executed immediately.

Also, trading of EUR/USD currency pairs will typically have a lower amount of volatility. Therefore, this currency pair is particularly suitable for beginners. Another advantage is the very low spread, especially if you are considered to be a scalping trader.

USD/JPY & USD/CHF

With USDJPY and USD/CHF currency pairs, traders may also have an advantage. These currency pairs have a very strong order flow, however, these currency pairs sometimes have too little “action.”

AUD/USD& USD/CAD

In the AUD/USD and USD/CAD currency pairs, the liquidity is a lot less. Therefore, their movements are sometimes very surprising and there are often unexpected reversals.

The AUD/USD and USD/CAD are often referred to as commodity currency pairs, as their prices correlate strongly with gold and oil. Australia is a large producer of gold and therefore the price of AUD/USD is typically influenced by the price of gold. Likewise, Canada is one of the largest oil producers worldwide, and therefore the price of the USDCAD often depends closely with the price of oil.

GRP/JPY

The GBPJPY is very volatile and therefore suitable only for more experienced binary options traders. This volatility is especially present when Japan publishes new economic data, causing drastic movements in the currency values.

GBP/USD

The GBP/USD is also a very solid currency pair for beginners to the binary options trading arena. Here you will find very good liquidity and very good movements. The GBP/USD is slightly more volatile than the EUR/USD, but not as volatile as trading the GBP/JPY currency pair.

Conclusion

It is suggested that beginners to the binary options trading market should initially focus first on the EUR/USD and the GBP/USD currency pairs. In order to ultimately find the best currency pair for yourself, it helps to test, test, test. In doing so, traders should initially put very small sums into these trades, and then document all trades in a trading journal. If you see that your strategy works in the relevant currency pair (you’d need about 100 trades so that the statistical significance is also relevant), then you can scale up and increase your investments.

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Best Currency Pairs to Trade in Binary Options

February 28, 2020

When trading binary options, traders have a wide variety of assets to choose from such as stocks, currency pairs (which is forex), indices and commodities. The opportunity to trade currency through the binary options market as apposed to trading directly on the Forex market offers benefits such as trading different currencies 24/7, simple risk managements and access to the biggest financial market in the world.

Trading currencies is the most common underlying binary options assets in binary trading. Traders are able to place trades in USD/EUR and USD/GBP for instance as well as others available. The idea is to know the best currency pairs to trade in binary options. Traders who want to place trades in currencies would be wise to follow the latest market news to get an idea of how the market reacts to different events such as natural disasters and political events.

Benefiting from Not One, but Two Currencies and Economies

When traders use a particular currency pairs in binary options trading, they benefit from the performance of two difference currencies as well as two different economies. Trading of currencies in the binary options market is far simpler than trading on the Forex market. There has always been a worldwide debate about the best currency pair to trade with.

Deciding on the best currency pair to trade depends on the preference given to the time of the trade. There are a number of factors that have a major impact on certain currency pairs, and economic data such as inflation reports, retail sales and customer confidence reports can be deciding factors about whether trade happens.

The most advanced economies in the world offer sought after currencies, and there are some frequently used currency pairs:

  • The EUR/USD currency pair has the best liquidity and the highest order flow. The amount of volatility is lower than EUR/USD currency pairs. This pair is suitable for beginners in binary options trading.
  • The AUD/USD and USD/CAD – known as commodity currency pairs. The prices of these currencies rely on the price of oil and gold in the international market. The liquidity of these pairs is somewhat lower than the EUR/USD pair.
  • The GBP/JPY pair is a good choice for experienced binary options traders and is very volatile, more so when the Japanese government publishes new economic data which results in uncontrolled movement in the currency values.
  • The GBP/USD is a stable currency pair with good liquidity and movements, especially for beginners.

Trading currency pairs by using binary options isn’t complicated – you just need at least some knowledge of technical and fundamental analysis to identify signals that help with predicting the price movement of a specific currency pair. There are many currency pairs available, but most seasoned traders stick to just a few so that they can track signals and perform thorough fundamental and technical analysis on each pair.

Get to Know the Compatibly Paired Currencies

It is suggested that beginners focus on the EUR/USD and the GBP/USD currency pairs. If you’re new to forex trading and you want to know the strategies in more detail, there are good books to read, but sometimes it is easier and certainly quicker to look at videos provided by different binary options trading websites.

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All info was correct at time of publishing

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    Good choice for experienced traders!

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