Volatility

Volatility refers to the degree of variance in an asset’s trading prices compared to its mean price over a certain period of time in the marketplace. The higher the frequency and amount of price movements, the more volatile an asset’s price is.

Standard deviations of logarithmic returns are often used to calculate volatility. Many investors keep an eye on an asset’s volatility in order to spot and profit from trading opportunities based on price movements. Excessive and unexpected price volatility, on the other hand, might dissuade investors with lower risk tolerance.