Historical Volatility Ratio

2022년 6월 5일

Historical volatility is an indicator of the extent to which a price may diverge from its average in a given period. Hence, increased price fluctuation results in a higher historical volatility value. It is important to keep in mind that the historical volatility figure does not indicate the price direction but rather how unstable a price is.

Volatility is generally a measure of the riskiness of an investment. Increased volatility serves as an indication of increased uncertainty and risk. The opposite is also true; decreased volatility serves as an indication for lowered uncertainty and risk. As commonly expected in financial instrument trading, HV can be used along with other trading patterns, trends, and other indicators to identify instruments that they consider to be risky or highly volatile.

Historical volatility can be utilized as an instrument by traders who only trade underlying financial instruments. Measuring the instability of a market can impact the expectation of an investor on how much or to what extent the market may change and offers some guidance in making price forecasts and executing a trade.

A high volatility can imply a possible change of trend when aggressive buying/selling enters the market because the large transaction volumes will trigger notable price reversals.

Furthermore, historical volatility does not assess the probability of loss primarily, even though it can be used to provide an indication thereof.

HV can be used to assess by how much the price of a security shifts from its average value. In markets where a predominant trend exists, historical volatility provides an overview of the extent to which traded prices may have deviated from a central or moving average price. In smooth markets with a strong predominant trend, low volatility levels can be expected even though prices may fluctuate drastically as time passes.

This version is just a smoother version of standard HV. This is achieved by dividing HV of 2 different periods.

2022년 6월 22일

릴리즈 노트

Levels can now be edited to desired numbers