Forex Market Historic Volatility

Forex Market Historic Volatility

Forex Market Volatility

Forex Historic Volatility Research of FxPros.net

This research is based on data and analysis of the most popular pairs in the Forex market. The data used are corresponding to a wide time frame beginning in the first day of the millennium (1/1/2000) and ending in August 2013. The total time frame covers about 13.5 years.

■ Daily Statistics → Time Frame Between January, 2000 and August, 2013.

 

Measuring Historic Forex Volatility

For Measuring Forex Volatility we are using two methods that are based on Average True Range (ATR).

What is the Average True Range (ATR)?

The Average True Range (ATR) is an indicator developed by J. Welles Wilder to measure market volatility. {Book, “New Concepts in Technical Trading Systems”, 1978}

The True Range according to Wilder can be measured using two main methods:

■ 1-Method: Current High minus the Current Low

■ 2-Method: Current High minus the Previous Close

 Our Variation Model to Measure Volatility

In order to measure volatility we are using two methods similar to ATR:

1) Intraday Volatility

■ Intraday Volatility (%) = {(Intraday High – Intraday Low) / Intraday Low}%

2) Daily Volatility

■ Daily Volatility (%) = {(Current Daily High – Previous Daily Low) / Previous Daily Low}%

 

Forming our Sample to Measure Forex Volatility

Our currency sample contains 7 major Forex Pairs. Here is how our sample to measure Forex Volatility is formed.

 

The most Traded Forex Currencies

The most traded currencies in the world are the US Dollar (USD), the euro (EUR), the British Pound (GBP), the Japanese Yen (JPY), the Canadian Dollar (CAD), the Swiss Franc (CHF), the Australian Dollar (AUD) and the New Zealand Dollar (NZD). Note that the US Dollar Currency is involved in more that 80% of all transactions made.

Here are the weights of the most traded Forex Currencies in the world:

  • US Dollar (USD), 80% of the total volume
  • Euro (EUR), 37% of the total volume
  • Japanese yen (JPY), 20% of the total volume
  • British Pound (GBP), 16% of the total volume
  • Swiss Franc (CHF), 6% of the total volume
  • Australian Dollar (AUD), 5 % of the total volume
  • Canadian Dollar (CAD), 4% of the total volume
  • Swedish krona (SEK) 2.3% of the total volume
  • Hong Kong Dollar (HKD) 1.9% of the total volume
  • Norwegian Krone (NOK) 1.4% of the total volume

 

Research Focuses on the 7 Forex Majors

As the above currencies are traded against it other we are provided with the most liquid currency pairs. Liquidity means tight spreads and lower transactional cost. As an outcome high-liquid Forex pairs attract Forex scalpers and arbitrage-traders. That means further liquidity in favor of all traders. Here are the seven (7) Forex pairs that this analysis is focus on:

1) EUR/USD | 2) USD/JPY | 3) USD/CAD | 4) USD/CHF | 5) GBP/USD | 6) NZD/USD | 7) AUD/USD

» Check more General Forex Statistics

 

Forex Volatility Research Results

In the following table we can see the historic average volatility of the 7 major Forex pairs. The data concerns the period 2010 (January) - 2013 (August)

Here are all the Results of FxPros.net Research: 

CURRENCY PAIR  INTRADAY VOLATILITY DAILY VOLATILITY AVERAGE VOLUME (million USD)
EURUSD 1.07% 1.08% 574,928
GBPUSD 0.96% 0.96% 329,586
AUDUSD 1.32% 1.33% 249,204
NZDUSD 1.44% 1.45% 228,864
USDJPY 1.09% 1.09% 576,820
USDCAD 0.94% 0.93% 274,622
USDCHF 1.16% 1.15% 409,022
       
Average Volatility 1.140% 1.141%  

 

Forex Historic Volatility -Analytical Results

The results of the analysis are divided into 3 main periods: 2000-2004, 2005-2009, 2010-2013

ANALYTICAL RESEARCH RESULTS

3-PERIODS

 

 » 2000-2004 

 

 

 » 2005-2009 

 

 » 2010-2013 

 

More Research on FxPros.net: » The Rating Brokers Formula version 4.0

 

 

Forex Historic Volatility

FxPros.net

MACD & Forex Technical Analysis

 

Using MACD When Trading Forex

 

Introduction to MACD (Moving Average Convergence / Divergence)

MACD is a very popular technical analysis tool developed back in 1979. MACD aims to identify major trend reversals in the prices of Financial Traded Instruments, and it can do that job relative well. But when it comes to the identification of overbought and oversold market levels there are much better tools available than MACD to do that job.

In overall, MACD is a good trend-indicator that it should be used along with another indicator capable of identifying overbought and oversold market levels, such is RSI. Of course more advanced traders may use their own developed systems to identify overbought and oversold market levels, I use TCI (Trading Center Indicator), more about TCI Technical Analysis here.

How can we Calculate MACD

MACD is usually measuring the price difference between a 12-day Exponential Moving Average (EMA) and a 26-day Exponential Moving Average (EMA) while the trigger is a 9-day Exponential Moving Average (EMA).

■ MACD Line is calculated by the 12-day EMA minus the 26-day EMA

■ MACD Signal Line is calculated by the 9-day EMA

■ MACD Histogram is calculated by the MACD Line minus the MACD Signal Line

 

HF Social

 

2 MACD Triggers

At times when MACD moves above the 9-day Exponential Moving Average (EMA) then the underlying instrument’s market is considered as a bullish market.

At times when MACD moves below the 9-day Exponential Moving Average (EMA) then the underlying instrument’s market is considered as a bearish market

 

Researching and Altering MACD Basic Settings

More combinations of settings may be used by traders in order to fasten MACD results. In the two AUDUSD charts that are presented below we have used the setting (MACD 8,34,5) and that means a very fast trigger.

Chart: AUDUSD 1-Week Chart using MACD and FxPros Technical AnalysisAUDUSD 1 WEEK CHART 

Chart: AUDUSD 30-Minute Chart using MACD and FxPros Technical Analysis

AUDUSD 30-MINUTES AND MACD 

If we take a close look to the MACD indications regarding AUDUSD and the corresponding Real Market Activity, we may conclude that sometimes MACD can be used effectively to identify price reversals either in short-term or in mid-term timeframes. Some false trend-reversal alerts can be found too, but in overall I think that the results are not bad if we consider that I have chosen this Forex Pair and the two time frames 100% randomly.

 

IronFX 35%24Registration 468x60 EN40

 

MACD on MetaTrader4

For those who are interested in researching Forex using MetaTrader, here is the structure of MACD in MQL (The MetaTrader’s Built-In Expert-Advisor Language).

---Starts---

<expert>

type=INDICATOR_ADVISOR

separate_window=1

used_buffers=2

<param>

type=int

name=FastEMA

value=12

</param>

<param>

type=int

name=SlowEMA

value=26

</param>

<param>

type=int

name=SignalSMA

value=9

</param>

<ind>

color=Silver

type=DRAW_HISTOGRAM

</ind>

<ind>

color=Red

</ind>

</expert>

#header#

#property copyright "#copyright#"

#property link      "#link#"

 

#indicator_properties#

#extern_variables#

#mapping_buffers#

//---- indicator buffers

double ExtSilverBuffer[];

double ExtRedBuffer[];

 

//+------------------------------------------------------------------+

//| Custom indicator initialization function                         |

//+------------------------------------------------------------------+

int init()

  {

   #buffers_used#;

//---- drawing settings

   #indicators_init#

//----

   SetIndexDrawBegin(1,SignalSMA);

   IndicatorDigits(5);

//---- indicator buffers mapping

   SetIndexBuffer(0, ExtSilverBuffer);

   SetIndexBuffer(1, ExtRedBuffer);

//---- name for DataWindow and indicator subwindow label

   IndicatorShortName("MACD("+FastEMA+","+SlowEMA+","+SignalSMA+")");

//---- initialization done

   return(0);

  }

//+------------------------------------------------------------------+

//| Moving Averages Convergence/Divergence                           |

//+------------------------------------------------------------------+

int start()

  {

   int limit;

   int counted_bars=IndicatorCounted();

//---- check for possible errors

   if(counted_bars<0) return(-1);

//---- last counted bar will be recounted

   if(counted_bars>0) counted_bars--;

   limit=Bars-counted_bars;

//---- macd counted in the 1-st buffer

   for(int i=0; i<limit; i++)

      ExtSilverBuffer[i]=iMA(NULL,0,FastEMA,0,MODE_EMA,PRICE_CLOSE,i)-iMA(NULL,0,SlowEMA,0,MODE_EMA,PRICE_CLOSE,i);

//---- signal line counted in the 2-nd buffer

   for(i=0; i<limit; i++)

      ExtRedBuffer[i]=iMAOnArray(ExtSilverBuffer,Bars,SignalSMA,0,MODE_SMA,i);

//---- done

   return(0);

  }

//+------------------------------------------------------------------+

 

---Ends---

 

MACD & Forex Technical Analysis

by Giorgos Protonotarios, Financial Analyst

FxPros.net

 

You may also download this code just by pressing the download button.

Attachments:
FileDescriptionFile sizeCreated
Download this file (MACD.txt)MACD on MetaTrader4MACD ON MQL-4 (MetaTrader4)2 kB2013-08-05 11:52

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