Historical Volatility

L’idée en termes simples

Volatility measures risk: the bigger and more frequent the moves, the higher it is. Expressed per year, it can be compared with option prices and other markets.

Mode de calcul

Take the logarithmic return of each candle, compute their standard deviation over N candles and scale it to a year (√252 for daily candles, adjusted for other timeframes), in per cent.

r = ln(close ÷ close₋₁)
HV = stdev(r, N) × √(periods per year) × 100

Comment l’utiliser

• Position sizing: smaller positions when volatility is high.
• Spotting quiet periods that often come before big moves.

Tirer des conclusions

• Compare with the ticker's own history: 10% is high for EURUSD and low for bitcoin.

Points de vigilance

• Backward-looking: it measures what has been, not what will be.

Un peu d’histoire

Standard deviation of returns became the textbook risk measure with modern portfolio theory (1950s) and option pricing (1970s).