VOLATILITY
=========PAST =============Present ==============Future==============
Historical volatility ==============theoretical Price ==========Implied Volatil=============
before investing in any currency, must determine the volatility because without it you get NO preofits.
Formula:
Variation = Average (High - Low) and High, Low of Yesterday.
Average = (High + Low) / 2
SO:
Varaition = (High + Low) / 2 * (High - Low) ok
If and only if the volatility is above 90% mean it is strong enough to invest AND MAKE PROFIT
EXP:
on 29/09/2010
AUD/USD
High or H = 0.9644
LOW or L = 0.9573
Close or C = 0.9622
CLOSE in 00:00 GMT exectly
APPLY formula then
Varaition = (High + Low) / 2 * (High - Low) ok
Varaition = 0.96085 * 0.0071
Variation = 0.00682235
Test the volatility if we de use 1 LOT with laverage of 200:1 <=> 10K
1------------> 10K
0.00682235-------------> X
X = 10k times 0.00682235 / 1
X = 68.038
it is not too much, so the best decission is not invest this pair tomorrow and msut wait for volatility over 90% to be sure
and we do use thos volatility formula only for tomorrow trading. because we gonna use small frame on M15.
small frame = littel volatility
big frame = huge volatility