Explosion in Forex Trading Ranges

Forex trading ranges have exploded over the past few months. The daily average trading range has doubled for all of the actively traded currency pairs in 2008, with some currency pairs even seeing a 200% rise in their average daily range.

However the big explosion in volatility has actually happened in the past 9 weeks. EUR/GBP, USD/CAD and the AUD/USD have seen the largest increases to their average daily range, but the range for the EUR/USD and GBP/USD has also increased materially.

More specifically, in 2007, the EUR/USD had an average daily range of 84 pips. Since October, its average daily range has been 267 pips, a more than 300 point rise.

Understanding trading ranges is very important because it plays a big role in developing effective money management strategies. I explore this concept in more detail in the second edition of Day Trading & Swing Trading the Currency Market.

EUR/GBP which use to known as one the range trading currency pairs saw its average daily trading range increase from 36 pips in 2007 to 142 pips since October, a whopping 400 percent rise. Say goodbye to the days of the hiding in low volatility of EUR/GBP because it is currency pair that has seen the largest expansion in volatility.

Trading Range

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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