Monday, March 21, 2011

Volatility

Modern markets have an increased variety of volatility behaviours. Volatility develops in four different situations. They are:
  • Trend volatility
  • Price volatility
  • Volatility trend collapse
  • Volatility wipe
The first volatility situation is trend volatility. This is where the market has short term up trends and short term downtrends. The up trend may continue for 10 or 15 days and also move up by a large percentage. When the downtrend develops it also falls by a large percentage in just a few days. This has become a feature of markets after the Global Financial Crisis.



The second volatility situation is price volatility.

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