mrjakewoodhouse on Nostr: Measuring volatility helps us understand how much an asset’s price tends to move. ...
Measuring volatility helps us understand how much an asset’s price tends to move. This lets us compare different investments and set realistic expectations. Generally, the more volatile something is, the bigger the price swings and the harder it can be emotionally to hold through ups and downs. But those big moves also create opportunity: sharp drops can be good buying moments, and big spikes can signal times for caution.
For example, if an asset has 5% volatility over the past 60 days, then on about 41 of those days (roughly two-thirds or 1 standard deviation), the next day’s price moved less than 5%. On 57 of those days (about 95% of the time, or 2 standard deviations), the next day’s move stayed within 10%.
For example, if an asset has 5% volatility over the past 60 days, then on about 41 of those days (roughly two-thirds or 1 standard deviation), the next day’s price moved less than 5%. On 57 of those days (about 95% of the time, or 2 standard deviations), the next day’s move stayed within 10%.