Realised volatility
How do traders measure how wild a market actually was, rather than how wild it felt?
In plain words
Realised volatility is the size of the price swings that actually happened over a period, usually expressed as a yearly percentage so that different periods can be compared.
Why it matters
Position sizes, stop distances and margin requirements are often set from recent volatility. When volatility jumps, a position that was small enough last month can be several times too large this week.
In a real week: BTC, week of 9 March 2020
In the week of 9 March 2020, BTC's realised volatility measured from hourly prices was 318.1% a year, and its largest single hourly move was -18.21%. Its worst day, 12 March, returned -39.51%, and the week closed -33.27% below its open.
A common mistake
Treating realised volatility as a forecast. It describes the window that has passed; the next week can be calmer or wilder.