Volatility

Volatility quantifies price movement — typically as the standard deviation of returns, average true range (ATR), or implied volatility from options. Higher volatility means larger swings in both directions, more opportunity, and more risk. Volatility cycles: low-volatility ranges compress before breakouts; high-volatility expansions exhaust into new ranges. Risk management must adapt — position size should fall as volatility rises so the dollar risk per trade stays constant.