Forex Market Historical Volatility Research (2000–2013)
This study examines the historical volatility of the most actively traded currency pairs in the Forex market over a broad timeframe, from January 1st, 2000, to August 2013—a period spanning approximately 13.5 years.
- Data: Daily data 1/2000-8/2013
- Sample: EUR/USD | USD/JPY | USD/CAD | USD/CHF | GBP/USD | NZD/USD | AUD/USD
Measuring Historical Volatility
Volatility in the Forex market is assessed using models based on the Average True Range (ATR) indicator.
What is ATR (Average True Range)?
Developed by J. Welles Wilder and introduced in his 1978 book "New Concepts in Technical Trading Systems", the ATR is designed to measure market volatility by accounting for price gaps and daily trading ranges.
Wilder defined the True Range (TR) using two primary methods:
- Method 1: Current High – Current Low
- Method 2: Current High – Previous Close
Our Approach to Measuring Volatility
Building on the ATR concept, we apply two custom formulas to capture daily and intraday volatility:
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}%
These models allow for a consistent and comparative assessment across different currency pairs.
Focusing on the 7 Major Currency Pairs
Our research focuses on the seven most liquid and widely traded Forex pairs, which include the U.S. Dollar (USD) as a component in each pair:
-
EUR/USD } USD/JPY | USD/CAD | USD/CHF | GBP/USD | NZD/USD | AUD/USD
The Most Traded Currencies (by Market Share)
The U.S. Dollar features in over 80% of all Forex transactions globally. Below is the market share of the leading currencies:
| Currency | Market Share |
|---|---|
| USD | 80% |
| EUR | 37% |
| JPY | 20% |
| GBP | 16% |
| CHF | 6% |
| AUD | 5% |
| CAD | 4% |
| SEK | 2.3% |
| HKD | 1.9% |
| NOK | 1.4% |
These currencies form the foundation of the global Forex market, and the pairs listed above represent the most actively traded combinations.
Why Focus on Major Pairs?
Major pairs offer high liquidity, resulting in:
- Tighter spreads
- Lower transaction costs
- Greater suitability for scalping and high-frequency trading
These factors contribute to deeper market participation and more reliable price action.
Volatility Analysis: 2010–2013
The table below presents average volatility data for the seven major pairs during the period from January 2010 to August 2013.
|
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 Market Historical Volatility
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