Volatility

Volatility measures how much and how quickly prices fluctuate. High volatility means large, rapid price swings. Low volatility means prices move slowly within narrow ranges. In forex, volatility is driven by economic data releases, central bank decisions, geopolitical events, and shifts in market sentiment.

Volatility is neither good nor bad — it's a characteristic that traders need to adapt to. High volatility creates more trading opportunities and potential profit, but also increases risk and makes stop-loss placement harder. Low volatility reduces risk but also compresses profit potential and can lead to choppy, indecisive price action.

The Average True Range (ATR) indicator is the most common way to measure volatility. It calculates the average range of price movement over a specified period. Traders use ATR to adjust their stop-loss distances (wider stops in volatile markets, tighter in calm ones) and position sizes (smaller positions when volatility is high to keep dollar risk consistent).