Extra indicators

Historical Volatility

How much the price has been swinging, as an annual percentage, from the standard deviation of returns.

The idea in plain words

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.

How it is calculated

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

How to use it

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

Drawing conclusions

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

Example

EURUSD daily, HV(20) = 6%: one standard deviation of a year's moves is about 6%.

Prices in examples are illustrative.

Watch out for

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

A little history

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

Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.