Investing in the forex market: volatility and correlation
Forex markets can have a moderate amount of volatility and therefore potential risk/return for investors, similar to stock markets. Given a Euro Currency Volatility Index (EVZ) price of 8.1โก, investors may project the benchmark EUR/USD currency market index to move in a range of +/-8.1%. over the next year with a probability of about 68.3%.
While other major pairs like GBP/USD or USD/JPY can move more or less than EUR/USD, they only tend to do so by a few percentage points. Additionally, the forex market has been largely uncorrelated with the stock market over the last decade, which can result in diversification for those who invest in the stock and forex market.
margin requirements
Most crypto markets and stock markets require a 50-100% margin, which means investors are required to pay $50-100 for every $100 invested in crypto or stocks. The foreign exchange markets may require less margin due to their less volatile nature, and this reduced margin requirement may result in gains or losses that exceed the amount of the margin. For example, the margin requirement for EUR/USD is only 2% in IG US currently, which translates to just $2 for every $100 in EUR/USD investment.**
