In the Forex market, there are most volatile currency pairs that will give you that profitability you desire.

When looking for high returns in the forex market, volatile currency pairs can be prime targets. 

Most Volatile Currency Pairs for High Returns

1. USD/TRY (U.S. Dollar/Turkish Lira)

Volatility Drivers
The USD/TRY currency pair is one of the most volatile in the forex market, largely due to the economic and political climate in Turkey.

Political uncertainty often surrounds Turkish elections, policy changes, and diplomatic relations, especially with the United States and the EU. High inflation rates in Turkey further exacerbate volatility, as fluctuating consumer prices impact the currency’s purchasing power.

Additionally, the U.S. Federal Reserve’s monetary policy plays a significant role; interest rate hikes in the U.S. strengthen the dollar, putting downward pressure on the Turkish lira. These factors combine to create frequent and sometimes drastic price swings in the USD/TRY pair.

Return Potential

USD/TRY appeals to high-risk traders due to its potential for sharp and sudden price movements.

The economy in Turkey, characterized by persistent inflation and sporadic political events, can lead to rapid shifts in currency value.

High volatility means traders can take advantage of both upward and downward trends, especially when significant news events trigger lira depreciation or appreciation against the dollar.

However, the return potential comes with equally high risk, making risk management critical for traders in this pair.

2. GBP/JPY (British Pound/Japanese Yen)

Volatility Drivers

GBP/JPY is one of the more erratic currency pairs due to several influencing factors. The British economy’s close ties with the European Union mean that Brexit negotiations, trade deals, and economic policies significantly impact the pound.

Meanwhile, the Japanese yen is often viewed as a safe-haven currency, influenced by global risk sentiment and the Bank of Japan’s policies, including negative interest rates and stimulus measures.

Together, these drivers result in large price swings in GBP/JPY, especially during times of economic uncertainty in either region.

When the market perceives risk, yen demand rises, often creating large intraday movements within the pair.

Return Potential

GBP/JPY is a favourite among short-term traders because of its tendency to make large moves within a single trading session.

These price swings allow for profit-taking opportunities during intraday trading or swing trading, though they require a keen eye on global news and economic data releases.

For traders prepared to monitor both the U.K. and Japanese economic calendars, GBP/JPY provides opportunities for rapid gains due to its fast-moving nature, though it requires a solid risk strategy to mitigate potential losses.

3. AUD/JPY (Australian Dollar/Japanese Yen)

Volatility Drivers

AUD/JPY is heavily influenced by the economic data from both Australia and Japan, along with broader global factors.

Australia’s economy is closely tied to China, its largest trading partner, so Chinese economic performance, trade policies, and demand for commodities like iron ore play a significant role.

Additionally, Japan’s low-interest-rate environment and the yen’s safe-haven status mean that AUD/JPY is very sensitive to shifts in global risk sentiment.

For instance, when risk appetite is high, the Australian dollar tends to strengthen against the yen, whereas in risk-off scenarios, the yen gains ground, creating sharp fluctuations.

Return Potential

Due to its connection to risk sentiment, AUD/JPY is an attractive pair for traders looking for volatility-driven opportunities.

This pair often moves strongly in reaction to news, such as economic data releases from China, commodity price changes, or global financial sentiment shifts.

Short-term traders can capitalize on this by entering positions during expected high-volatility periods. However, with this return potential comes the need for swift and careful analysis, as rapid sentiment changes can lead to equally fast price reversals.

4. USD/ZAR (U.S. Dollar/South African Rand)

Volatility Drivers

The USD/ZAR pair is influenced by multiple factors, including commodity prices, South African economic policies, and U.S. interest rate decisions.

South Africa is a major exporter of metals, particularly gold and platinum, making the rand highly sensitive to fluctuations in commodity prices.

When gold prices rise, the rand often strengthens, while declining gold prices tend to weaken it.

South Africa’s economic policies, including fiscal policy and inflation rates, also play a major role in driving the currency’s movements.

Additionally, decisions by the U.S. Federal Reserve to raise or lower interest rates can heavily impact the USD/ZAR pair, as they influence the dollar’s strength and capital flows to emerging markets like South Africa.

Return Potential

USD/ZAR is a favorite among traders seeking high volatility due to South Africa’s developing economy, which is more susceptible to sudden changes in global and domestic factors.

This volatility offers multiple opportunities for profits as the rand frequently experiences substantial shifts in value against the dollar.

However, these swings come with high risk, so traders need to approach USD/ZAR with a strong risk management strategy, as it can be quite reactive to geopolitical developments and commodity price changes.

5. EUR/RUB (Euro/Russian Ruble)

Volatility Drivers

EUR/RUB is strongly affected by geopolitical tensions, economic sanctions, and oil price fluctuations. Russia is one of the world’s largest oil exporters, so changes in oil prices have a significant impact on the ruble.

For instance, when oil prices rise, the ruble tends to strengthen, while falling prices weaken it.

Furthermore, geopolitical events—particularly those involving relations between the EU and Russia—often lead to sharp movements in this pair.

Sanctions imposed on Russia by the EU or other Western nations can create significant volatility, as they directly impact the Russian economy and investor sentiment toward the ruble.

Return Potential

Due to its connection to both EU and Russian economic and political developments, EUR/RUB offers high-risk, high-reward trading opportunities.

Sharp price movements are common, especially in response to major news or oil price changes. For experienced traders with a good grasp of geopolitical dynamics, EUR/RUB can be a profitable but risky choice.

Risk management is crucial for trading this pair, as sudden events or policy changes can lead to unpredictable price swings.

6. USD/MXN (U.S. Dollar/Mexican Peso)

Volatility Drivers

The USD/MXN pair is influenced by Mexican economic data, U.S. Federal Reserve policies, and oil prices.

Given Mexico’s close economic ties with the United States, the peso is particularly sensitive to shifts in U.S. monetary policy and economic conditions.

For example, when the Federal Reserve raises interest rates, the dollar tends to strengthen, often leading to a depreciation in the peso.

Oil prices also play a significant role, as Mexico is a major oil producer. Changes in oil prices impact the Mexican economy and, subsequently, the value of the peso, creating another source of volatility in USD/MXN.

Return Potential

The USD/MXN pair is attractive for traders due to its volatility, which is influenced by both domestic and U.S. economic events.

Strong price movements often occur around U.S. economic data releases, creating opportunities for short-term traders to capitalize on these swings.

However, this volatility also makes the pair sensitive to abrupt reversals, so it’s important for traders to have solid risk management in place.

For those who follow U.S. and Mexican economic news closely, USD/MXN can offer substantial return potential, particularly during periods of heightened economic activity or interest rate decisions

7. EUR/TRY (Euro/Turkish Lira)

Volatility Drivers

The EUR/TRY pair is primarily driven by European Central Bank (ECB) policies, economic conditions in Turkey, and high inflation rates in the Turkish economy.

ECB policies, such as interest rate changes or quantitative easing, influence the strength of the euro, causing fluctuations in this pair.

On the other hand, Turkey faces economic challenges, including currency instability, high inflation, and policy unpredictability, which can add volatility to the Turkish lira.

Political events or changes in monetary policy within Turkey can further amplify price movements, creating opportunities for traders who monitor European and Turkish markets closely.

Return Potential

Like USD/TRY, EUR/TRY is known for its frequent and substantial price movements.

This pair’s volatility provides potential for high returns, especially during periods of policy changes or significant economic news from either the Eurozone or Turkey.

However, with high volatility comes high risk, so traders often approach EUR/TRY with robust risk management, including stop-loss orders and smaller trade sizes to manage potential losses.

8. GBP/NZD (British Pound/New Zealand Dollar)

Volatility Drivers

GBP/NZD volatility is largely influenced by the differing economic performances of the U.K. and New Zealand, as well as their respective central bank policies.

Interest rate decisions from the Bank of England (BoE) or Reserve Bank of New Zealand (RBNZ) can create sudden price shifts in this pair.

Additionally, New Zealand’s economy heavily relies on agricultural exports, so any changes in global demand for products like dairy and meat or trade relations significantly impact the kiwi dollar (NZD).

Meanwhile, Brexit developments, economic data, and trade relations can cause substantial moves in the pound, further contributing to GBP/NZD volatility.

Return Potential:

GBP/NZD is attractive for traders who are comfortable with large price swings, as the pair’s less liquid nature means it can experience significant shifts.

This volatility can lead to substantial returns, especially for traders familiar with both economies and the agricultural market’s influence on New Zealand’s economy.

However, the pair’s high volatility also poses considerable risk, making it critical for traders to use proper risk management techniques, such as setting stop-losses and regularly monitoring economic indicators.

Considerations for Trading Volatile Pairs

Volatile currency pairs like those mentioned above can offer high returns but also come with significant risks. Traders should adopt effective risk management strategies to mitigate potential losses:

1. Stop-Loss Orders: Setting stop-loss orders helps limit downside risk by automatically closing trades if prices move against expectations. This is crucial for volatile pairs where prices can shift quickly.

2. Smaller Trade Sizes: Trading smaller positions can help control risk exposure, as volatile pairs can make large price movements in a short time. Smaller trade sizes allow traders to stay in the market while limiting potential losses.

3. Close Monitoring: Volatile pairs require constant attention, particularly during times of scheduled economic data releases, central bank meetings, or geopolitical events. Staying informed about global and regional news is essential to anticipate potential price movements.

Frequently Asked Questions

1. What are the benefits of trading volatile currency pairs?

Volatile currency pairs offer the potential for high returns due to their large price swings.

For traders who thrive on short-term opportunities, volatility provides more frequent entry and exit points, allowing them to capitalize on rapid price changes.

However, volatile pairs are best suited for traders comfortable with risk, as they require quick decision-making and effective risk management strategies to handle unexpected reversals.

2. How can I manage risk effectively when trading volatile currency pairs?

Managing risk in volatile pairs involves using several key strategies. Setting stop-loss orders is crucial, as it prevents excessive losses in case of sudden price shifts.

Additionally, consider using smaller trade sizes to limit your exposure, as this can help reduce the impact of large, unexpected market movements.

Monitoring global news and economic releases also helps you anticipate possible volatility and adjust your positions accordingly.

3. Which tools and indicators are best for trading highly volatile currency pairs?

To trade volatile currency pairs, many traders use technical indicators like the Average True Range (ATR) to gauge volatility levels, as well as Bollinger Bands, which help identify potential breakouts or reversals.

Price action tools, such as support and resistance levels, and trend-following indicators like the Moving Average Convergence Divergence (MACD), can also be useful for spotting trends and potential reversal points.

These tools, combined with real-time market monitoring, can improve your ability to respond effectively to sudden price movements.