Volatility refers to the degree of variation in trading prices over time, commonly measured by standard deviation or variance. In financial markets, higher volatility indicates greater price fluctuations, which can reflect uncertainty or significant market events. Traders often view volatility as both an opportunity and a risk; while it can lead to substantial profits, it can also increase exposure to losses. Typically, volatility can be more pronounced during economic releases, geopolitical events, or changes in market sentiment. Understanding the nature of volatility helps traders make informed decisions, manage risk effectively, and develop suitable trading strategies. Tools such as the Average True Range (ATR) and Bollinger Bands are commonly used to quantify and visualize volatility.
Risk Management