The conflict between Ukraine and Russia has been going on for over a month.
The impact of the conflict was felt by global financial markets, where during the last few weeks the prices of gold, oil, USD, and stocks moved significantly.
This condition is known as “volatility”, which occurs due to sudden and extreme price movements. This is a reaction to market uncertainty. So it can be said that volatility is the amount of price movement, either up or down. The bigger and more frequent the price swings, the more volatile the market.
In addition to global events such as the Russia-Ukraine conflict which currently has quite an impact on price movements or the pandemic crisis in early 2020, market volatility is generally caused by conditions of uncertainty due to changes in interest rates, inflation rates, and various other monetary policies. So it is also mandatory for us traders pay attention to reports or data published by the Central Bank.
We need to understand the volatility of the market and the instruments in it in order to design a strategy that suits these conditions. By mastering the pre-volatility situation where the price starts to spike, we can decide whether to exit the transaction or adjust the strategy accordingly.
Types of Volatility
Finex will help you to understand volatility in order for you to make the best decisions from a condition of uncertainty, namely profit from the financial side that is beneficial for yourself and your family.
In general, volatility can be divided into two types, namely historical volatility and implied volatility. By studying the types, you can get the signals you need in the moments leading up to a potential spike in volatility.
The measure is data on past price fluctuations or previous trends to predict future price movements. However, this indicator does not provide insight into the details of the next trend or direction of price movement.
Implied volatility is a key parameter in option pricing. This indicator gives an idea of how much volatility an instrument will be in the future.
Volatility in Forex
Forex as a currency pair transaction is influenced by various aspects and contexts depending on each country.
Generally, traders who avoid big risks tend to choose currency pairs with low volatility, while traders who like risk tend to be eager to monitor currency pairs with high volatility.
High volatility increases risk, but at the same time, there is a large potential for profit.
According to Seputar Forex, there are five volatility indicators that are often used by traders because of their convenience. These five indicators are already available on the Metatrader 4 platform that you use to trade on Finex.
- Bollinger Bands
- Average True Range (ATR)
- Keltner Channel
- Parabolic Stop and Reverse
- Momentum Indicator (Rate of Change/ROC)
Impact of the Russia-Ukraine Conflict on Market Volatility
The current increase in market uncertainty caused by the humanitarian event in Ukraine has not given rise to a clear timeline, or in other words, we will still be full of uncertainty.
There is potential for damage to long-term relations between East and West due to the conflict which could further erode investor sentiment and confidence.
Referring to its historical characteristics, gold has become a hedging asset in the midst of a crisis situation. It can be seen from the volatile gold price over the last few weeks.
From an oil market perspective, Russia is one of the world’s three largest oil producers after the United States and Saudi Arabia.
Currently, oil prices have fallen from highs near US $140 per barrel in early March. This condition is sufficient to illustrate that global oil supplies can withstand a decline in supply from Russia. However, this price is still above the normal long-term price, so it can be said that the oil market is far from stable.
At the Fed meeting in March 2022, they raised their target fed funds rate by a quarter-point to 0.25%-0.5% which is in line with market expectations. With this release, the USD bullish momentum is projected to be maintained.
Understanding volatility is one of the keys to taking advantage of this unique situation. Make the right approach with Finex. Always follow our news through notifications and newsletters.
original article Volatilitas, Pengertian, Jenis, dan Cara Menghitungnya