Historical Volatility
Overview
Historical Volatility measures the annualised standard deviation of past log price returns, giving traders a statistical benchmark for how volatile an asset has been. It is essential for options pricing and risk management in stocks and increasingly in crypto derivatives. Use our position size calculator to incorporate HV into your risk management workflow.
How It Works
HV = Standard Deviation of [ln(Close today / Close yesterday)] over N periods × √252 (for daily data annualisation). Common periods are 10, 20, and 30 days. Higher HV means the asset's price has been swinging more dramatically; lower HV means calmer price action.
Key Signals
- HV at historical lows = volatility compression, potential explosive move ahead.
- HV spiking above its average = high-volatility regime, widen stops.
- Comparing current HV to implied volatility helps gauge option pricing fairness.
Common Mistakes
- Assuming HV predicts future direction — it only measures past magnitude.
- Comparing HV across different assets without understanding baseline volatility differences.
- Not adjusting position sizes when HV changes — higher HV demands smaller positions.
More Volatility Indicators
Standard Deviation
Standard Deviation measures the dispersion of closing prices from their mean over a given period, providing the mathematical foundation for <a href="/academy/indicators/bollinger-bands" class="text-primary hover:underline">Bollinger Bands</a> and many other volatility tools. Rising standard deviation signals increasing volatility across <a href="/market/stocks" class="text-primary hover:underline">stocks</a>, <a href="/market/crypto" class="text-primary hover:underline">crypto</a>, and <a href="/market/forex" class="text-primary hover:underline">forex</a>. Review our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to see how standard deviation powers multiple volatility-based trading tools.
Chaikin Volatility
Chaikin Volatility measures the rate of change of the difference between high and low prices, providing a unique view of how the trading range is expanding or contracting. Unlike <a href="/academy/indicators/atr" class="text-primary hover:underline">ATR</a>, which smooths absolute range, Chaikin Volatility focuses on the acceleration of range changes. It is useful in <a href="/market/stocks" class="text-primary hover:underline">stock</a> and <a href="/market/forex" class="text-primary hover:underline">forex</a> markets and can be explored alongside other volatility tools in our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a>.
Mass Index
The Mass Index identifies potential trend reversals by measuring the narrowing and widening of the range between high and low prices, generating a "reversal bulge" signal when the range first expands then contracts. It is a unique contrarian tool for <a href="/market/stocks" class="text-primary hover:underline">stock</a> and <a href="/market/forex" class="text-primary hover:underline">forex</a> traders. Combine Mass Index reversal signals with momentum tools from our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> for higher-probability entries.
Keltner Channels
Keltner Channels plot an EMA with upper and lower bands based on <a href="/academy/indicators/atr" class="text-primary hover:underline">ATR</a>, producing smoother envelopes than <a href="/academy/indicators/bollinger-bands" class="text-primary hover:underline">Bollinger Bands</a> — and the two are frequently used together for the TTM Squeeze setup. This combination identifies low-volatility compression zones that precede explosive <a href="/guides/trade-breakouts" class="text-primary hover:underline">breakout</a> moves in any market. Apply Keltner Channels on <a href="/tools/platforms/tradingview" class="text-primary hover:underline">TradingView</a> and overlay Bollinger Bands to spot squeeze conditions with a single glance.