Volatility
The degree of price variation over time. High volatility means bigger swings — more opportunity and more risk.
Volatility measures how much a security's price fluctuates over a given period. It is the statistical heartbeat of a market — high volatility means large, fast price moves; low volatility means slow, steady drift.
Historical (realized) volatility is calculated from past price data using standard deviation of returns. Implied volatility (IV) is derived from options prices and reflects the market's expectation of future volatility.
Volatility is not directional — a highly volatile stock can be moving up or down sharply. For options traders, volatility is the primary driver of premium pricing. For equity traders, it dictates position sizing and stop placement.
Related Terms
Bear Market
A sustained decline in prices of 20% or more from a recent high. Pessimism and selling pressure dominate.
BeginnerLeverage
Using borrowed capital to increase position size — amplifying both gains and losses beyond your own equity.
IntermediateLiquidity
How easily you can enter or exit a position without moving the price. High liquidity = tight spreads, deep order books, fast fills.
BeginnerShort Position
Borrowing shares and selling them, hoping to buy them back cheaper. Profit when the price falls; loss when it rises.
IntermediateSwing Trading
Holding positions for days to weeks to capture a directional "swing" in price. Balances active trading with manageable time commitment.
IntermediateVolume
Total number of shares (or contracts) traded in a given period. Volume confirms price moves — no volume, no conviction.
Beginner