Financial market volatility
Often in binary options trading, we use the concept of Volatility. However, some traders do not quite understand the meaning of this word. In this article, we will figure out what Volatility is and how it is used in binary options trading.
Volatility is volatility. A statistical index (indicator) that determines the price change over a period of time. Price volatility is the main indicator in the financial market.
Volatility shows the deviation of the price from the average over a certain period of time.
This means that if the average price of an asset per week is $100, the minimum is $90, the maximum is $110. We can express volatility both in absolute value ± $ 10 and in relative to the initial value ±10%.
In simple words, this is the amplitude of price fluctuations over a certain time.
Volatility can be high and low. We can observe high after the release of news, or during significant economic events. Low is the usual behavior of an asset.
How volatility is used in binary options trading
Binary options have an advantage over the rest of the markets and this advantage is the speed of trading. Therefore, it is best to trade assets with high volatility. Rapid price change in a short period of time. Knowing what fluctuations cause news, you can prepare and trade on the news.
High volatility is predictable, so traders look for moments in which the price will have a strong swing amplitude.
Volatility properties
- Volatility constancy – volatile markets remain the same as assets. If the price of an asset reacts sharply to the news, it will always be.
- Cyclical volatility – strong volatility repeats cycles
- Striving for the average level – the price is determined over a period of time and tends to the average level.
Volatility indicator
One of the best volatility indicators is the Average True Range
Tagged with: Binary Options Academy
