Volatility describes the magnitude of price fluctuations. High volatility means prices are moving in large or rapid swings, while low volatility means prices are relatively steady. It is commonly quantified using the standard deviation of returns or by indicators that track recent price range.
Volatility is distinct from direction: a market can be highly volatile while moving up, down, or sideways. It is often described as clustering, meaning calm and turbulent periods tend to group together rather than alternate randomly.
For markets, volatility is central to risk and to the pricing of options and derivatives. Higher volatility generally means wider price ranges, larger potential moves in both directions, and greater uncertainty, which is why it is monitored closely as a measure of market conditions rather than as a buy or sell signal.