What is Volatility?

Within a marketplace context, volatility refers to the degree of variation an asset's trading prices undergo relative to its mean price over a certain period of time. The more volatile the price of an asset is, the greater the frequency and number of its price changes. Volatility is usually measured using standard deviations of logarithmic returns. Many investors track an asset's volatility in order to identify and capitalize on trading opportunities based on perceived price trends. However, excessive and unpredictable price volatility often deters investors who have a lower risk tolerance.