Volatility is a statistical indicator that characterizes the degree of variability in the price of an asset over a certain period of time.

Main characteristics of volatility

  • High volatility:strong price fluctuations, the possibility of quickly making high profits, but also high risks of large losses.

  • Low volatility:weak, smooth price movements, low profit potential in the short term, but also lower risks.

Measured in standard deviations from the average price or as a percentage of the asset price (ATR – Average True Range).

Examples of high and low volatility

  • Highly volatile assets:cryptocurrencies (for example, Bitcoin), shares of young technology companies, commodities.

  • Low volatility assets:blue chips (shares of reliable large companies), major currency pairs (for example, EUR/USD), government bonds.

Risk-management guidelines

  • Choose your volatility level according to your risk tolerance and trading strategy.

  • When volatility is high, use wider stop losses to avoid closing your position prematurely.

  • Size your position based on volatility to manage your risk.

How volatility affects a trading plan


Volatility is the “market temperature.”The higher it is, the “hotter” and more unpredictable the market. The ability to assess and use volatility allows you to find entry points into a trade and correctly determine the level of risk.