If the price of the asset is unstable and changes frequently, with big spikes from time to time, the asset is said to have high volatility. On the other hand, if the price is consistent and stable over a long period, the asset is said to be less volatile. As a new trader, you must decide if trading during the highly volatile trading session is part of your strategy or if you feel more comfortable during times of quieter market movements. If you’re looking for a lot of market movements then you might schedule those times when different trading sessions overlap into your trading strategy. These timings can vary depending on which products and how many different asset classes you trade.
The commodity market is characterized by high near-term volatility. Sometimes, even a relatively small incident can cause a large swing in prices. In 2020, crude prices plummeted to the point where there was more supply than demand and companies were paying people to take the oil off their hands. Especially in Saudi Arabia, which is among the world’s largest oil-producing countries.
The volatility calculator helps traders employ money management strategies by reducing their position sizes at times of high volatility. It computes historical volatility in real-time for each currency pair using past information on exchange rates for several timeframes which can range from one week to one year.
Key takeaways
- Volatility is the measure of price fluctuations on an asset over a given time period.
- Do your research, it is important to gain some knowledge of trading and the factors impacting market prices.
- A volatility calculator helps traders employ money management strategies.