What is Volatility?
The magnitude of price changes over time — measured most commonly as the standard deviation of daily returns.
Volatility is a statistical measure of how much an asset's price varies over time. Higher volatility = larger daily ranges = wider stops needed but also larger potential gains. Lower volatility = tighter ranges but slower moves.
Forex pair volatility varies. Majors (EURUSD, GBPUSD) have ~60-80 pip daily Average True Range (ATR). Crosses (GBPJPY, EURJPY) are higher: 100-150 pips. Exotics (USDTRY, USDZAR) can move 500-1000 pips. Volatility also varies by session: London-NY overlap is the most volatile window of the day.
Implied volatility (IV) is the market's expectation of future volatility, derived from options pricing. When IV is elevated (around big macro events) brokers often widen spreads to compensate, which is why spread quality during news events is a key broker selection criterion.