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Historical (Natenberg) Volatility

It is impossible to foresee the future, but if you know the past behavior, you can use it as a guide for right decisions of what is likely to happen next. With this idea in mind, Historical Volatility calculates the variance of fluctuations in a security over time.

Usually dealers begin to look at inconstancy over a long time, 10 years as minimum. It lets identify short-term fluctuations from ordinary activity. It is also important not to miss short-term volatility. If a commodity has averaged 20% volatility over the last year but only 10% over the past thirty days, it might be wise to adjust the volatility estimates to accommodate the latter data.

Historical inconstancy is determined by Sheldon Natenberg, as the normal fluctuation of the logarithmic price movements calculated at regular intervals of time.

Natenberg Volatility

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