The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results.

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

Volatility definition

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

Highly volatile markets are generally unstable, and prone to making sharp upward and downward moves. Markets with low volatility are less likely to see such spikes, and are as such more stable.

As a general rule, most highly volatile stocks come with greater risk, but also greater chance of profit. This is why most traders try to match the volatility of a particular asset to their own risk profile before opening a position.

Volatility is often measured in beta, a measure of an asset’s price movements when compared to the movements of its underlying index. 

 

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