How is volatility different from erraticness?

December 20, 2022

Volatility and erraticness are two terms that are often used in the context of financial markets, but they refer to slightly different concepts.

Volatility refers to the degree of price fluctuations in an asset or market. An asset or market is considered to be volatile if it experiences significant price movements over a short period of time. Volatility can be measured using a number of different metrics, such as the standard deviation of returns or the average true range.

Erraticness, on the other hand, refers to unpredictable or random changes in an asset or market. An asset or market is considered to be erratic if it exhibits sudden and unexpected changes in price or behavior that cannot be easily explained or predicted. Erraticness is typically a result of unexpected events or circumstances that can impact the market, such as economic shocks or major news events.

While volatility and erraticness are related, they are not the same thing. Volatility is a measure of the degree of price fluctuations in an asset or market, while erraticness refers to unpredictable or random changes in price or behavior. It’s possible for an asset or market to be volatile without being erratic, or to be erratic without being volatile.

Overall, both volatility and erraticness can have an impact on the performance of an asset or market and can affect the decision-making of traders and investors. Understanding the differences between these two concepts can help traders and investors better navigate the market and make informed trading decisions.

“I always know where I’m getting out before I get in.” – Bruce Kovner

sc name=”fma-cta”]

This website is owned and operated by Investor Unity Pty Ltd (ABN: 90 160 624 331). Any advice included in this website or correspondence is general advice only and is based solely on consideration of the investment or trading merits of the financial products alone, without taking into account the investment objectives, financial situation or particular needs (i.e. financial circumstances) of any particular person. In addition to its internal services, Investor Unity is compensated by brokers and other third parties by way of referral/affiliate and/or general partnership arrangements, via its websites and other communications. Investor Unity is genuinely interested in your long-term trading & investment success. We advise you to take all necessary steps to ensure you have a good understanding of the products & services you’re considering investing in – particularly if they involve leverage. While Investor Unity takes every care to ensure that we only deal with the highest quality services, from throughout the industry, past performance is not a guarantee of future performance. Before making an investment or trading decision based on the general advice, the recipient should carefully consider the appropriateness of the advice in light their financial circumstances and should carefully review the PDS of the relevant financial product as provided by your investment broker. Past results are not a guarantee of future performance. Please contact us, to discuss any questions or concerns you may have- we are here to help.