Volatility refers to the degree of variation or fluctuation in the price of a financial asset over a period of time.
Volatility measures how much and how quickly the price of an asset—such as stocks, bonds, or commodities—moves up or down. It is a key indicator of market risk.
High volatility means prices change rapidly and significantly.
Low volatility means prices move slowly and remain relatively stable.
Volatility can be caused by factors such as economic news, company earnings, political events, interest rate changes, or global crises. Traders often benefit from high volatility due to larger price swings, while long-term investors may prefer lower volatility for stability.
Volatility does not indicate direction. A stock can be highly volatile while moving either upward or downward. Investors often measure volatility using statistical tools like standard deviation or by tracking indices such as the Volatility Index (VIX).
"If a stock price moves from ₹500 to ₹550 and then drops to ₹480 within a few days, it shows high volatility due to large price swings in a short period."