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Volatility definition
Volatility is a measure of how much and how fast the price of an instrument moves over a given period. Higher volatility means larger price swings, while lower volatility means steadier prices.
Volatility shows up across forex, stocks, commodities, indices, crypto, futures, options, and CFDs. It tends to rise around economic data releases, central bank decisions, earnings, geopolitical events, and thin-liquidity periods. Because bigger swings change the risk on a position, traders cut position size or widen their stops when volatility climbs.
Volatility tells you the size of price moves, not their direction. A market can be highly volatile while ending the week roughly where it started, so volatility is not the same as a trend, which measures sustained direction. It also differs from liquidity: liquidity is how easily you can trade without moving the price, while volatility is how far the price travels once it moves.
Volatility Example
You watch gold trade in a tight USD 2,350 to USD 2,355 band during a quiet session, a range of USD 5.
The next day, after a US inflation report, gold swings between USD 2,330 and USD 2,390:
USD 2,390 - USD 2,330 = USD 60
The second session is far more volatile, because the same market covered a USD 60 range against USD 5 the day before.
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