Volatility is used when we are looking for breakout trade opportunities. The volatility measures the overall price fluctuation at a certain time; this information checks the potential breakout.
Volatility is an important factor in building a trading strategy because it measures the currency rate change and the profit from the FX trade.
There are the following indicators that are used to check the volatility in the forex trading:
Average True Range (ATR): This indicator calculates a true average range over a number on chart candles. Suppose you want to know what changes the price for the duration of the N Period, then this indicator is the best option for you. It is used to measure the entry-level volatility and used to adjust the position size.
Bollinger Band (BB): It is another volatility measuring indicator with its charting platform. It measures the volatility by the currency rate’s standard deviation by subtracting and adding some multiplying it. Now, it bands to the period of high volatility and squeezes to the low volatility.
Keltner Channel: Keltner channel is a popular indicator for measuring the volatility in the forex market. It works similar to the Bollinger band and moves average to the line and subtracts and adds to the high low difference to form the bands.
Volatility Band: It is not a particular indicator. There are many indicators known as volatility bands, and they have a similar function to the Bollinger band. The use of multiple deviations to form the bands. All these indicators are used to measure the volatility parameter to form bands.
Volatility Ratio: is calculated into the ratio of the current true range and exponential to the current ture range. It shows how to compare the current true range and the true range in the previous candle.
Moving Average: moving average is the most common indicator used by the forex trader, and it is a simple tool that provides invaluable data. You can put a moving average to measure the market’s movement for an X amount of time.
For example, adding the 20 SMA in the daily chart provides you with the movement of the forex market for 20 past days.
There are many types of moving average indicators available; exponential and weighted indicators. Check IC Markets Sign up.
At the Bottom Line
So, which one is the best volatility indicator? It is not necessary which one is the best. It matter which one meets your requirements. The market moves through the cycle of high and low volatility. Analyze the movement of need; may possibly induce future market trends.