Volatility is definitely one of the most important factors to consider when trading FX.
Volatility changes depending on the time of day and often increases rapidly when important news is announced.
This "Volatility" indicator for Metatrader 4, introduced and available for free download here, is an indicator that can quantitatively analyze the volatility in the market.
The formula of this indicator is as follows:
Volatility = (UpPrice-DownPrice) / N / Point
This indicator is highly effective for analyzing volatility.
"The higher the value of this indicator = the higher the volatility". There are trading strategies that will or will not work if volatility is too high or too low. So, if the volatility at a given moment indicates that a strategy will not work well then you may want to add a trading rule such as "do not trade if volatility is high".
Also, if volatility is increasing sharply, the price move may be an overshoot. In such a case, you may want to look for setting up a contrarian trade.
Download the "Volatility" indicator from the button below
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