Glossary · Chart and price

Volatility

How much and how fast an instrument's price moves over a period; high volatility means larger, quicker swings in both directions.

By Sky Trade editorial teamUpdated November 5, 2026

Volatility measures the size of price movements, not their direction. A pair that moves 80 pips a day is more volatile than one that moves 30, whether it ends higher or lower. Traders gauge it with ATR, standard deviation, Bollinger Band width or simply the size of recent candles.

Volatility changes constantly. In forex it rises around news and at session opens and falls in quiet hours. It also clusters: calm periods tend to follow calm ones and turbulent periods turbulent ones, until something changes.

For Higher/Lower trades volatility cuts both ways. A larger typical move means a correct call is more likely to show clearly by expiry — and so is a wrong one. What volatility does not do is make direction easier to predict. A common mistake is seeking out the most volatile instrument because “that's where the money is”; it is also where money disappears fastest.

On Sky Trade's OTC instruments, volatility is part of the server's random model and varies slowly over time. Expiry choice and volatility belong together, as volatility explained shows.

Example

EUR/USD's ATR(14) on M5 is 4 pips in the Asian session and 11 pips after the London open. A 5-minute trade in the afternoon faces moves almost three times larger, in either direction.

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