The market’s estimate of how much a currency pair will fluctuate over a certain period in the future is known as implied volatility. For online investors, a volatile market means both potential risks and an abundance of opportunities. Many traders follow market news and economic calendars in an attempt to recognize potential volatility, benefit from it and stay ahead of the market. Volatility is a useful concept for forex traders that can give them a sense of the risk involved in trading a particular currency pair.

For forex traders, volatility in the forex market is not simply chaotic change. Even within seemingly meaningless swings in value, trends and patterns emerge as market participants try to make sense of the price action. Volatility is a measure of the degree of change in the value of a currency, currency pair or the forex market as a whole. Volatility is most commonly referenced when a currency has seen sharp changes in value compared to many of the other currencies in the market.