Volatility Indicators
Volatility indicators measure the rate and magnitude of price changes in financial markets. They help traders assess market risk, identify potential breakout opportunities, and adjust position sizes based on market conditions.
Key Characteristics
- Price Dispersion: Measure how much prices fluctuate over time
- Risk Assessment: Quantify market uncertainty and potential risk
- Dynamic: Volatility changes based on market conditions
- Universal Application: Useful across all market types and timeframes
Common Use Cases
- Risk Management: Adjust position sizes based on volatility levels
- Breakout Trading: High volatility often precedes significant price moves
- Option Trading: Volatility is crucial for options pricing and strategies
- Market Timing: Enter trades during favorable volatility conditions