Trading Currency Pairs with High Volatility for Maximum Returns

The Forex Market is a money and exchange market widely referred to as the forex market where participants can trade one currency for another one. It is global’s biggest and most active financial market where literally trillions of dollars changes hands on a daily basis. Businessmen enter the forex market to make profits and capitalize on changes in the price of one currency relative to others. Another effective way to increase the potential income of such trading is the use of pairs with high volatility.

Fluctuations here is defined as the extent of variation in the price of an asset over time. It is commonly used to depict the change that is experienced with the forex rate of different currencies. Large fluctuations mean large price variations which can be considered as both threats and opportunities in the given field.

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When choosing currency pairs to trade it must be noted that all the pairs do not move to the same extent as far as the value is concerned. Certain currency pairs are known to be very unpredictable and when managed well, volatility is capable of producing the highest amount of profits. Normally, these currency pairs are formed from currencies of countries with high economic risk, political instabilities or even low economic integration.

A prime example of a high volatility currency pair is the AUD/USD this is the pair where AUD is traded against USD. The AUD/USD has high fluctuations since it reflects quite an orientation towards the commodity market country, with strong economic dependency on China. These factors can cause rather sharp changes in the Australian Dollar quotes, which means that forex trading can open interesting opportunities for the participants.

A second high volatility currency pair is the GBP/JPY – that is, the British Pound and the Japanese Yen are traded. It refers to the interest differentials between the Great Britain and Japan, key statistics and figures and political events among others. While trading this pair may not be very frequent due to fluctuations within the pair, forex traders can experience high returns due to the amount of fluctuation within it.

It is vital to state that drawing maximum returns depends on high volatility, but at the same time, it means high risks. Forex trading contain higher risk that means there are high possibilities of great loss and any trader should avoid this by employing certain measures. Of these, stop loss orders are one of the most widely employed wherein a particular trade is closed as soon as the price gets to an intended low. This can go along way in controlling losses during such unfavorable market trends.

The second is to avoid the focus on a single type of trading activity by including a great variety of positions in your portfolio. Since many currencies relate to each other in the forex market, and they have different volatility levels, forex currencies dispel the risk. When done correctly, this could at least shield investors against large losses on any particular currency pair yet still gain from other pairs.

Therefore, it can be argued that trading the most volatile pairs is the best way to maximize profit in forex business. Thus, if a trader targets currency pairs with high volatility, things like the AUD/USD or the GBP/JPY, the fact is that the price can move significantly. But, it should be pointed that there are certain associated risks with the high volatility and thus, it is highly essential that right approach to managing these risks should be adopted. Using the knowledge which has been outlined in this paper and with commitment in trading, forex traders can be able to benefit from high volatility currency pairs.