Currency Stability

Trading Discussion
1

hi peeps,

would like to find out from you guys on how stable is currency prices?

I’ve heard people saying that currency prices are stable because it moves in 4th decimal places which is very minimal.

I’ve also heard that currency prices are stable because each currency pair would prevent or wouldn’t allow the other currency to surge too high or low due to economic fundamentals/ import and export

On the other hand, i’ve heard that in comparison with stocks, the decimal movement is very little compared to stocks which explains currency prices stability

What are your views whether currency prices are considered stable?

2

How do you define stable?

Here are the long-term moves in the EUR/USD, in percentage terms, over the past eight-and-one-half years.

Based on your definition of stability, how would you answer your own question?

862×793

3

comparing same time duration for both forex and stocks, whats the % change in both? which is more drastic?

drastic = instable

4

I blogged on this subject a little while ago after getting frustrated by journalists and others calling forex a very volatile market. You can read it here: Looking at Volatility Across Markets.

By way of simple comparisson, consider how long it took EUR/USD to rise 60%+ as shown on Clint’s chart. Now consider how long it took the S&P 500 to rise about the same amount this year.

5

Thanks Rhodytrader for the article!

I see your point there :smiley:

6

If currency rates were always stable, I would never make money. :eek:

7

Yes, currencies are stable.

But not when you took them alone, when you took them all together they give you 1, 0 , -1. For a simple mathematical reason, they are all doing the same thing on the same place, buy and selling on earth.

This where you have to explore more about what we call the correlations

8

From the perspective of a trader imo they’re incredibly unstable since currency value does fluctuate quite a lot from the 4th decimal (or 2nd decimal for yen) affecting trades drastically given the sheer size of entries even from a retail level (in comparison to a trader dishing out 200000 on particular company, not so likely unless leverage is also involved but that in turn is also less likely). Of course I’d have to agree that currency on the whole as it affects a consumer is fairly stable in comparison to shares - which isn’t saying alot.