Decoding Market Volatility
Basically, volatility is considered as bad news by most investors as stock market volatility and financial crisis go hand-in-hand. Actually, volatility can sometimes be good news and some other times bad news. In any case, understanding volatility is a key process towards optimizing your portfolio management and maximizing your returns in the long-run.
Volatility can be used either for detecting potential breakouts or for categorizing financial assets based on the level of their risk.
What is Actually Volatility?
Volatility is a statistical tool that measures the degree of variation of a price series by using a standard deviation of returns.
Simple truths about volatility in finance
→ Volatility describes the level of changes in the price of a financial instrument over time
→ Volatility does not imply direction, only risk
→ The more volatile an asset the higher the risk of holding it
→ Measuring volatility is essential in categorizing financial assets based on their risk profile (portfolio management)
→ Volatility may help traders confirming breakout signals (technical analysis)
→ The implied volatility of a financial asset can create seasonality patterns over the years
Read more: Forex Market Volatility
Bank of International Settlements Forex Report (2016)
The BIS (Bank of International Settlements) triennial survey is considered the most comprehensive report in the Foreign Exchange Market.
BIS Report / Summary of Findings (compared to three years ago)
-The total Forex market volume is slightly diminishing due to regulatory tightening ($5.1 from $5.4 trillion a day)
-The US Dollar maintains and strengthens its dominant position, the Euro, on the other hand, is falling but maintains the second position
-China's Yan market share is rising fast and already reached 4.0% (doubled since three years ago)
-The Forex market's activity became even more concentrated (77%) in the major five (5) world financial centers
-London's role as the global financial center is diminishing, but still, maintains the dominant market share
-The three major Asian financial centers (Tokyo, Hong-Kong, and Singapore) are rising fast in terms of volumes and market shares
Read more: BIS Forex Market Report 2016