The usual definition tells us that volatility is the ability of something to change relative to its original state per unit of time. In relation to financial markets, this, of course, will be a change in the price of a ticker (instrument, currency pair) per unit of time: per day – average daily volatility (opening price = 1.3245, closing price = 1.3185, volatility = 1.2345-1.3185 = 0.0060, or 60 points), per month – average monthly, etc.
According to this indicator, volatile instruments can be conditionally identified, realizing that high volatility means a rapid increase in profits, but always “unexpectedly” – losses increase just as quickly and much more. Be sure to take into account the average daily volatility in the checklist for opening a trade!
In addition, the volatility of any instrument may increase at different times under the influence of factors studied by fundamental analysis, for example, the release of news about unemployment or the speech of the head of the National Bank with an annual report before dismissal.
As you have already noticed, periods of volatility are displayed on the chart in the form of long candles, showing a rapid directional movement in one direction.
In those moments when this movement will be in your direction (the profit from the transaction will grow before your eyes), – You will be visited by a feeling of euphoria and, as a result, self-importance, self-esteem, etc., – in other words, you will feel a crown on your head. The crown, put on the head, squeezes the brain, and it flows through the spinal canal into the tail, of course, depriving you of the ability to think rationally along the way.
And this is already an internal process, and in order to understand what to do with it, you need to understand yourself, your trading psychology, because profit is not the only thing that deprives a trader of common sense!
They say that a trader is taught not profits, but losses. Greed has a much greater impact: settling on the neck, between the shoulder blades, this very green toad, clutching its throat with its paws, begins to strangle.
The brain, deprived of oxygen, also fails to cope with the function of sanity and deprives the trader of the ability to make cold-blooded decisions! How not to suffer from this (financially, of course) is stated in our recommendations, in the article “Psychology of Trading”.
