Vagueness about the Volatility

It is my observation that there is over and over again a bit of uncertainty about this word volatility. If you listen to any of the financial media, volatility is only ever mentioned when the market is going down. To be sure, a 400-point is called a volatile move, but a 400-point up day is by no means described as volatile.

In the simplest conditions, It can be called as the relative rate on which the price of the security vary ups and downward. Market makers of the online forex trading always have so many methods to measure the volatility, but the pricing model needs a perfect measurement of the volatility of the market.

Now that’s enough, and most of the traders consider volatility in relative terms and don’t consider the calculation, but I suppose it helps to really appreciate the mathematics of it.. We can see that with any of charting software.
The subsequent stage is to come across the natural logarithm; this is to imitate the log normal allocation of stock market profits. Next, multiply this by 100 to put crosswise it as a percentage.

The historical volatility number, depends upon the back period and it can vary extremely, it computes the older data, while what we actually want to recognize as option traders is what volatility is in the time is left till option expires. As this can’t be identified, this takes option trader to formulate a volatility prediction, or at least an idea of where volatility can be quite relative to the present in sense to compute the idea of exact value. This is how to use the historical volatility as a tool, but the trader must always look ahead.