Why is Volatility so low?

[jimdaly]

Can anyone give me a few reasons why volatility has been so low in the Forex markets for the last 12 months, considering the potential for serious crises in Europe and the USA?

Is everyone sitting on their hands? It's the lowest level of volatility I have seen in 30 years.

 

[Thriyve]

In my opinion volatility and trader expectation are closely related. So if a trader sees that the market moves lets say 100pip on average they would continue to expect it to move around that rate. When you now factor in uncertainty the Traders no long know what to expect. This can have 2 effects. Either we become paralyzed which would result in a decrease in volatility or we become erratic which would result in an increase in volatility. Huge funds who are less emotional will see this activity and use it to there advantage.

 

[Rhody Trader]

The fact that the interest rates of the major economies are so low (and the spreads narrow) is a contributing factor to lower volatility in exchange rates. They are all pursuing similar monetary policies, so naturally their currencies will tend to do the same sort of thing - thus less pair volatility.

 

[random12345]

Can anyone give me a few reasons why volatility has been so low in the Forex markets for the last 12 months, considering the potential for serious crises in Europe and the USA?

Is everyone sitting on their hands? It's the lowest level of volatility I have seen in 30 years.

Genuinely in 30 years? First 6 months of 2002? First 6 of 2007?

January is traditionally a ... liquid... month so I'm doubling my sizes.

 

[kalott]

Beware and prepare for a flash crash?

 

[random12345]

Beware and prepare for a flash crash?

A sudden 10% drop in Forex? Really?

 

[NVP]

Can anyone give me a few reasons why volatility has been so low in the Forex markets for the last 12 months, considering the potential for serious crises in Europe and the USA?

Is everyone sitting on their hands? It's the lowest level of volatility I have seen in 30 years.

yep.......monthly G8 readings on my own VIX based indicators show that 2012 was not great

could be hundreds of reasons ..........but for me it means the only way is now up in 2013

N

 

[Rhody Trader]

but for me it means the only way is now up in 2013

Careful. The middle 2000s saw sustained low volatility. Lots of crying traders. Of course they didn't like what came afterwards too much either.

 

[NVP]

understood.......understood