Volatility measures the size and frequency of a price’s swings. A share that moves a few percent every day is volatile; one that barely moves is not. It is the most common statistical stand-in for risk, though the two are not the same thing, volatility describes movement in both directions.
Key takeaways
- Volatility is symmetric: it counts upward moves as well as downward ones.
- High volatility raises the chance of being forced to sell at a bad moment.
- Thin, illiquid markets are usually more volatile.