Standard deviation is the statistical measure commonly used to represent volatility. Most of the time, the stock market is fairly calm, interspersed with briefer periods cryptocurrency exchange for bitcoin, ethereum and altcoins of above-average market volatility. Stock prices aren’t generally bouncing around constantly—there are long periods of not much excitement, followed by short periods with big moves up or down. These moments skew average volatility higher than it actually would be most days.

1. Blue-chip corporations historically perform well and yield a positive return, while small-cap, more growth-oriented corporations might have large returns with periods of high volatility.
2. The CBOE Volatility Index (VIX) quantifies market expectations of volatility, providing investors and traders with insight into market sentiment.
3. Many different factors can contribute to volatility, including news events, financial reports, posts on social media, or changes in market sentiment.

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ATR measures the average of true price ranges over a specified period, giving traders an understanding of the degree of price volatility. Higher volatility means that the price of the asset can change dramatically over a short time period in either direction, while lower volatility indicates steadier price movements. Another measure is historical volatility, which calculates the standard deviation of price changes over a specified period. Such erratic movements in asset prices can be a result of a host of interconnected factors ranging from macroeconomic data to shifts in investor sentiment.

VIX (volatility index)

For example, surpassing earnings expectations can lead to a positive surge in the company’s stock, while a merger announcement might lead to speculative trading, causing price fluctuations. Positive economic data might bolster investor confidence, leading to a surge in buying activity, while negative data can result in selling pressures. Economic indicators such as inflation rates, unemployment figures, and GDP growth can greatly influence the volatility of financial markets. Volatility is calculated by measuring the standard deviation in the return of an investment, and it is often used to calculate an investment’s risk. Market volatility can be caused by a variety of factors including economic data releases, political events, changes in interest rates, and unexpected news or events. Conversely, an asset with low volatility tends to have more stable and predictable price movements.

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The CBOE Volatility Index (VIX) quantifies market expectations of volatility, providing investors and traders with insight into market sentiment. It helps market participants gauge potential risks and make informed trading decisions, such as whether to hedge or make directional trades. While the VIX itself is an index and cannot be traded, there are funds and notes investors and traders can participate in to gain exposure to the index. Some traders and investors engage in buying and selling based on short-term expectations rather than underlying fundamentals. This speculative activity can magnify price movements, especially in assets that are subject to rumours or are in the media spotlight.

Within a few weeks, Bitcoin’s price skyrocketed from around US$6,000 to nearly US$20,000, only to crash back down in what is natural language processing the following months. This event not only attracted significant media attention, it also caught many traders off guard, highlighting the importance of understanding volatility. Understanding these factors and their interplay is essential to navigate market swings and make informed decisions in the ever-changing cryptocurrency landscape. Macroeconomic events, such as economic crises or geopolitical tensions, can also fuel volatility in the cryptocurrency market. These events can create a flight to safety, causing users to either buy or sell cryptocurrencies in response to broader market uncertainties.

A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. Many day traders like high-volatility stocks since there are more opportunities for large swings to enter and exit over relatively short periods of time.

This means that the price of the security can move dramatically over a short time period in either direction. A lower volatility means that a security’s value does not fluctuate dramatically, and tends to be steadier. Volatility is a statistical measure of the dispersion of returns for a given security or market index. It is often measured from either the standard deviation or variance between those returns. Writing a short put requires what is an exchange rate and what does it mean the trader to buy the underlying at the strike price even if it plunges to zero while writing a short call has unlimited risk.

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