What does volatility means with example?

[YUriy1991]

Hi can someone explain volatility with example, I understand what it kinda means but find it hard to implement in reality. Like for example if btc volatility is 4% does that means it goes up and down 4%? Everywhere i find it shows formulas which i am not interested in, I am interested in how I can implement it in my trading decisions.

First, understand what this means properly and correctly and where it leads. because if I'm not wrong In the context of trading, volatility is often considered as one of the risk considerations for the uncertainty associated with the investment that we are running, if you already understand, then you play.

The easy explanation as suggested by @Darker45 means what if you are a current trader with a low risk profile, you may want to avoid assets that have high volatility, because large price fluctuations can result in large losses and vice versa, if you are a trader with a high risk profile, high volatility is a potential opportunity for greater profits for your trading decisions.

[fillippone]

[When the Bitcoin options market matures, it will be possible to calculate Bitcoin's implied volatility, which is in many ways a better measure.

Well, I would say bitcoin options markets are already mature, as there are several billions of dollars in open interest and much more trading every given day.

Also, you described “historical volatility”, or the volatility Bitcoin has already experienced in the past. Options market quote the implied volatility, or the volatility bitcoin is expected to have toward the expiry of the option.
Totally a different animal: one is backward looking, the other forward looking.

[MusaMohamed]

Well, I would say bitcoin options markets are already mature, as there are several billions of dollars in open interest and much more trading every given day.

Also, you described “historical volatility”, or the volatility Bitcoin has already experienced in the past. Options market quote the implied volatility, or the volatility bitcoin is expected to have toward the expiry of the option.
Totally a different animal: one is backward looking, the other forward looking.

I agree that we can not use past data, look at the past performance of Bitcoin and past events, then say Bitcoin will have similar movements in future. Backwards and Forwards are very different and many things in future will not be the same like in the past.

Nevertheless, the common points between the past and the future, no matter what events will appear in future, are the psychological cycle of the market will not change; and the emotional as well as psychological responses of majority of the market participants will be repeated.

Greedy people will repeat their past faults in future, buy high sell low, and will continue their failure to control their emotion.

Fear and Greed index. They will be fearful when they need to be greedy and do oppositely when they need to be fearful, they are greedy.

[savetheFORUM]

Hi can someone explain volatility with example, I understand what it kinda means but find it hard to implement in reality. Like for example if btc volatility is 4% does that means it goes up and down 4%? Everywhere i find it shows formulas which i am not interested in, I am interested in how I can implement it in my trading decisions.

First, understand what this means properly and correctly and where it leads. because if I'm not wrong In the context of trading, volatility is often considered as one of the risk considerations for the uncertainty associated with the investment that we are running, if you already understand, then you play.

The easy explanation as suggested by @Darker45 means what if you are a current trader with a low risk profile, you may want to avoid assets that have high volatility, because large price fluctuations can result in large losses and vice versa, if you are a trader with a high risk profile, high volatility is a potential opportunity for greater profits for your trading decisions.

It also depends on how long you are planning to hold a certain asset despite the level of volatility that it carries. if you are a short-term trader with a low-risk profile, you should definitely avoid assets with high volatility, but if you are a long-term trader with a low-risk profile, you might consider assets with high volatility because that wouldn't affect your portfolio or trades that much since you won't be selling your assets very soon.

The same thing applies to users with high-risk profiles that are trading either for short-term or long-term, they need to choose assets accordingly after determining the level of volatility they carry. A lot of traders don't look at such metrics before making trades which becomes an issue later on.

[kamvreto]

Hi can someone explain volatility with example, I understand what it kinda means but find it hard to implement in reality. Like for example if btc volatility is 4% does that means it goes up and down 4%? Everywhere i find it shows formulas which i am not interested in, I am interested in how I can implement it in my trading decisions.

First, understand what this means properly and correctly and where it leads. because if I'm not wrong In the context of trading, volatility is often considered as one of the risk considerations for the uncertainty associated with the investment that we are running, if you already understand, then you play.

The easy explanation as suggested by @Darker45 means what if you are a current trader with a low risk profile, you may want to avoid assets that have high volatility, because large price fluctuations can result in large losses and vice versa, if you are a trader with a high risk profile, high volatility is a potential opportunity for greater profits for your trading decisions.

It also depends on how long you are planning to hold a certain asset despite the level of volatility that it carries. if you are a short-term trader with a low-risk profile, you should definitely avoid assets with high volatility, but if you are a long-term trader with a low-risk profile, you might consider assets with high volatility because that wouldn't affect your portfolio or trades that much since you won't be selling your assets very soon.

The same thing applies to users with high-risk profiles that are trading either for short-term or long-term, they need to choose assets accordingly after determining the level of volatility they carry. A lot of traders don't look at such metrics before making trades which becomes an issue later on.

But after all, assets with high volatility will provide faster returns because the set price targets are quickly achieved. Although using a long term strategy a fixed price target is set, if it is reached first it is good luck. The most suitable asset for crypto users and the safest is Bitcoin, it will be better for the long term with moderate volatility. We will see Bitcoin reach ATH again later. The more Bitcoin assets held, the more profit you will get.