1-14. Volatility

Trading might use metrics availability to define trading signals. For example, you can take a fix length rolling window and calculate the mean and standard deviation of prices within that window. If we draw a line, two standard deviations above and below the rolling mean, we can get a sense of the trend and tendency … Read more

Volatility is a very general metric of variability in returns, so it’s used in many ways. In this video, we’re going to mention a few possible ways that might be used in trading, but there are many more possibilities. First, you can classify stocks as highly volatile or less volatile. Some strategies might work best … Read more

At this point, you may be wondering, well, what causes volatility anyway? A natural assumption may be that volatility of a stock is caused by new information reaching the market. New information causes people to revise their opinions about the value of a stock. The price of the stock changes which causes volatility. However, research … Read more

It would be great to know what will happen before it happens, wouldn’t it? Traders sometimes try to forecast volatility in order to anticipate the market. The general thinking is that it’s easier to predict volatility than price, volatility tends to be sticky. A volatile market trading day is often followed by another volatile one. … Read more

When we’re predicting today’s volatility, we may think that data from the past month are important, but what happened yesterday is even more important than what happened last week. This introduces another possibility for how to estimate volatility. What we can do to increase the influence of the more recent past is weight, log return … Read more

So, we know how to calculate volatility for a given period. This gives us one number to capture return variability for this period, but we also know that the market changes over time. We know the market goes up and down, and while sometimes it seems highly variable, other times it seems relatively placid. For … Read more

Say we want to get a sense of how our returns are going to vary in the future. That is to say, we want to estimate the volatility of a stock we’ve invested in. How do we do it? Well, the simplest way is to calculate the standard deviation of the log returns of some … Read more

Well done on finishing the lesson. In this lesson, we talked about a lot of different things. We gave you some key insights into volatility that will really help you construct trading strategies. Understanding volatility is essential to understanding the markets, and this lesson provides a solid foundation.

Welcome back. In this lesson, we’re going to tell you all about volatility. Volatility is an important measure of risk, but what is risk? We’ve talked a little about it already, and you may have an intuitive idea for what it means. It’s basically uncertainty about the future and in particular, uncertainty about bad things … Read more