Volatility in trading describes how quickly and how far prices move over a given period.

Volatility in trading describes how quickly and how far prices move over a given period. When markets are volatile, prices swing sharply; when they are calm, prices change slowly and more predictably. Understanding volatility helps traders gauge potential risk and reward, choose position sizes, and time entries and exits. So, what is volatility in trading, exactly? In simple terms, it is the degree of variation in a security’s price, often measured by standard deviation or indicators such as Average True Range (ATR). Options traders also track implied volatility, which reflects the market’s expectation of future price movement and is embedded in option premiums. High volatility can create opportunity—bigger moves mean more profit potential—but it also raises the chance of large losses. Low volatility can reduce stress and slippage but may limit returns. Economic news, earnings, liquidity, and sentiment all influence how turbulent markets become. By learning how to read volatility and adapt strategies—such as adjusting stops, hedging, or scaling positions—you can trade with greater confidence in any market environment.

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