What it is
Historical volatility, also called realised volatility, measures how much price has actually moved recently, regardless of direction. A market that swings up and down a lot has high volatility even if it ends where it started.
It does not tell you which way the next move will go. Its job is to tell you what kind of market you are in, so you can size stops, choose between breakout and range tactics, and spot quiet periods that tend to end in bigger moves.
How it is calculated
1. For each candle, work out the log return: the natural log of (close divided by previous close). 2. Take the standard deviation of those returns over 20 candles (the length setting). 3. Annualise it: multiply by the square root of the number of periods in a year. WickSpeak uses the square root of 365. 4. Multiply by 100 to show it as a percent.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Length | 20 | 2 to 300 | How many returns go into the standard deviation. Shorter catches sudden changes in volatility; longer gives a steadier reading of the normal level. |
How to read it
How to trade it
- 1
Use historical volatility to choose a style, not a direction. On a 1 hour gold chart, when it is below its own average, mark the recent range high and low.
- 2
Take a breakout only when price closes outside that range and volatility starts to rise.
- 3
Place the stop on the other side of the breakout candle or back inside the range, for example 8 to 12 points on 1 hour gold.
- 4
Target the height of the range added to the breakout point.
- 5
When volatility is already far above its average, cut position size and widen stops so the money at risk stays the same.
A breakout taken on rising volatility is proved wrong when price closes back inside the range, or volatility drops straight back below its average and price stalls.
WickSpeak runs in your browser with nothing to install. When you add historical volatility, it writes a plain-English reading on the live candle: what the indicator is, what it is doing right now, how to trade it and what would prove that reading wrong. It says whether volatility is high or low against its own recent level and whether it is rising or falling, and explains what that means for stop size.
In Playbook, our no-code strategy builder, historical volatility can be a condition in a play. It can test whether historical volatility: is above its own average; is below its own average; is rising; is falling. Each condition can run on any of 12 timeframes from 1 minute to weekly, combined with up to 11 others, and the play can be backtested on past candles with your own costs and turned into alerts on screen, by email or by phone push. A common use is a filter that only lets a breakout play trade when volatility is rising, or keeps a range play out of the market when volatility is above its average.
Best markets and timeframes
Useful on every market. On gold, US30 and NAS100 it is most helpful on 1 hour to daily charts for comparing today's conditions with normal ones.
Common mistakes
- Reading high volatility as bearish. It only measures size of movement, not direction.
- Keeping the same stop and position size when volatility has doubled.
- Comparing the figure across platforms without checking whether they annualise with 252 or 365 periods.
Works well with
Questions traders ask
What is a good historical volatility reading?
There is no universal good number. Compare it with the same market's own average: above average means a more active market than usual, below average a quieter one.
What is the difference between historical and implied volatility?
Historical volatility measures how much price has already moved. Implied volatility is taken from option prices and reflects how much the options market expects it to move.
Why is historical volatility annualised?
Annualising puts every timeframe on the same scale so readings can be compared. WickSpeak multiplies by the square root of 365; many stock platforms use 252 trading days, which gives a slightly lower number.
Is ATR the same as historical volatility?
Both measure movement but in different ways. ATR is the average candle range in points, useful for setting stops. Historical volatility is the spread of percentage changes, useful for comparing markets and periods.