What is deviation in forex?

[PIPruit]

Can anyone explain what is deviation in forex?

 

[compu-forex]

There is also a second meaning for deviation within forex trading.

Deviation is a parameter you can send to your broker in trade request that allows them to fill your trade at a price other than what is quoted. This hankers back to the days of instant execution brokers so we are talking about 10 years.

You sent a trade request for EURUSD at 1.1010 plus or minus x pips deviation. If there was news or a fast market, and the broker could not execute your trade at your price you would get a re-quote. Deviation would then be used to allow the broker some room to move so you could get you trade done or else you would end up with an endless stream of re-quotes.

You can see from the above trade dialogue that you can select the permitted deviation.

Compare that with your market execution broker below :-

Re-quotes are something from yesteryear...you simply don't see it anymore. Now we have slippage because the brokers feed the market price to you irrespective of what price you wanted to trade at.

I see Exness & FXDD still use the Instant Execution dialogue box but I pretty sure that they have move to market execution, so their server will simply ignore the deviation parameter. They probably just haven't updated some of the setting in their MT4 platform.

 

[landorra]

It is a mathematical ratio measuring how distant is price right now from the average proce for the last X candles. Then you can get it more complicated, but that is the basic idea.

 

[JamesEdwards98]

Very nice explanation - I've always found it hard to find an example online

 

[landorra]

Very nice explanation - I've always found it hard to find an example online

You're welcome. You can find hundreds or more complex explanations, though. Be cautious when dealing with them.

 

[ele020]

Can anyone explain what is deviation in forex?

In Forex, the deviation is used to measure the volatility. Traders use deviation to put in context the current action price by determining a periodic price's closing relation to a mean or average value. This deviation is also known as slippage.

 

[Anna_S]

Deviation in forex often refers to the deviation from the expected value when an economic report or data point is released. For example, if economists expect the consumer price index (CPI) reading for a certain country to be 2.1% and then the actual figure released turns out to be 1.8%, the deviation here is -0.3%.

Some news sources refer to this news deviation as the surprise index. The element of surprise often moves markets if it is large enough, particularly with important news. For example, in April 2019, the Reserve Bank of New Zealand was expected to reduce interest rates by 0.25% points. However, the bank ended up shocking the markets and reducing the rate by 0.50% points. This caused the New Zealand dollar to decline sharply.

The efficient market hypothesis can explain why large news deviations, or surprises, cause quick and large market moves. The hypothesis posits that markets price in new information almost immediately, and this surprise entails new information. Traders rush to incorporate this new information into their analysis, which can be seen in their positioning.

When there is little or no deviation from expectations, markets often do not show much of a reaction, or the reaction would not be so strong as to when the surprise is bigger. Often, when the news comes exactly as expected, some traders close their positions to take some profit. This might cause a slight reversal in price action, despite a seemingly positive (or negative) news.

I've learn a lot. Thank you

 

[ele020]

In Forex, the deviation is used to measure the volatility of the market. This deviation is also known as slippage. And, slippage refers to the difference between the expected price of a trade and the price at which the trade is executed.

 

[Eryk Martin]

Greatly explained sir thank you.

 

[Akwin]

Can anyone explain what is deviation in forex?

I am a beginner but from what I am reading and learning, I can tell you the following:
Traders use it to put current price action into context by establishing a periodic closing price’s relation to an average or mean value. This is done by executing these basic tasks:

• Defining a series of closing prices according to time or another periodicity
• Calculating a mean value for the defined data set
• Measuring the dispersion, or difference between the closing price and the mean value

 

[FriendlyFX]

Anyone here use deviation as part of their strategy?