What volatility is

Volatility is how much and how quickly a price moves. It tells you about the size of moves, not their direction.

Why it matters to you

A market with bigger swings needs a wider stop. A wider stop needs a smaller position, if you want to keep the same risk. Many beginners get this backwards: they see big moves, get excited and trade bigger.

Two very different products

This track covers two things with similar names:

• The VIX: a measure of expected volatility in US shares, based on real options prices.
• Volatility 75: a synthetic index offered by Deriv, with no link to real-world markets.

Treat them as completely separate. What you learn about one does not transfer directly to the other.

High volatility is not an opportunity by itself

Bigger moves mean more possible profit and more possible loss, in the same proportion. Higher volatility also tends to come with wider spreads and more slippage on real markets.

Key point

Volatility is something you size for. It should make your positions smaller, not larger.