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Volatility
The magnitude of price swings over time — high volatility means bigger and faster moves.
What it is
Volatility measures how much price moves, not the direction. Crypto's headline feature is high volatility: BTC's annualized volatility is ~70%, vs ~20% for stocks. Smaller altcoins routinely have 200%+ volatility. High volatility creates BOTH opportunity (bigger moves to trade) and danger (bigger stops needed, more capital at risk). Volatility is itself tradeable: products like options price it directly, and pure volatility strategies profit from rising VOL regardless of direction. Realized volatility (what actually happened) and implied volatility (what options pricing predicts) diverge during regime changes — a leading signal of structural shifts.
Example
BTC's 30-day annualized volatility drops from 75% to 35% during a 6-week consolidation around $76K. Traders running breakout strategies pull back position sizes — calm market = smaller moves = less profitable for breakout systems.
How Indikora uses Volatility
Indikora's ATR-based position sizing adapts to current volatility: same risk in dollars regardless of whether the asset is in a calm or violent state.
Related terms
- ATR (Average True Range) — Wilder's 14-period average of true ranges — a pure measure of how volatile an asset has been.
- Bollinger Bands — Volatility envelope: a 20-period SMA flanked by two bands at ±2 standard deviations.
Strategy guides that cover this
- Dollar Cost Averaging (DCA) in Crypto — Strategy Guide
When DCA beats lump-sum, when it doesn't, and the math behind the most overlooked retail strategy