Volatility refers to the degree of fluctuation in the price of an asset over time. In financial markets, it is often used to describe how much the price of a financial instrument moves within a certain period.
When the price of an asset moves significantly and unpredictably over a short period, it is considered highly volatile. This means there are large price swings, which can result in both high potential gains and losses.
When the price of an asset moves slowly or with relatively smaller changes over time, it is considered low volatility. In this case, the market is more stable, and the asset’s price is less likely to experience large fluctuations.
Volatility plays a critical role in trading. By understanding and adjusting the position size and stop-loss levels according to market volatility, traders can better manage risk and increase the chances of trading success.
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