What is Volatility in the Stock Market?

If you go to a financial dictionary and look up the word "volatility", you will probably find a scholarly definition like: "In finance, volatility is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns".

In more simple terms, volatility is a measure of risk in the stock market. It is often related to the amount of fear that is in the overall market.

When volatility is high, you will mostly see the market go down.

Why? Because Fear=Selling. The higher the volatility/fear the more likelihood of selling.

What triggers fear/volatility? Many things, but right now it is the rising interest rates of US Treasuries that the market is getting spooked about.

Fear is the worst thing that an investor can have.

I've said this before, fear=selling. This is why I always stress that you know your own risk tolerance level, before you start investing a nickel. And you must be honest with yourself.

If you are going to invest in a risky stock, a currency, etc. you might make great gains BUT YOU MUST ACCEPT THE FACT that you may also lose greatly. This may happen at any time and suddenly.

Be prepared before you invest and only invest with what you are comfortable with being invested in.

We're all human and we all have fear, but when it comes to investing, how you handle your fear can make you money or cost you.


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