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    Historical Volatility (HV)
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      Historical Volatility (HV)

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        Article summary

        Historical Volatility (HV) measures the price dispersion of a security over a specified time period. It reflects the degree of past price fluctuations and provides insight into the asset's historical risk profile. HV is expressed as an annualized percentage and is derived from the standard deviation of relative price changes, measured using the natural logarithm, to estimate daily volatility. This value is then annualized according to the selected aggregation period.

        1. To calculate HV, the relative price change is measured as the natural logarithm of the ratio between the current and previous price values.


        2. The average return is then calculated based on these logarithmic price changes.


        3. Standard deviation is used to measure how much the returns deviate from the mean, producing the daily volatility.


        4. The daily volatility is converted into an annualized value by multiplying it by the square root of the number of periods in a year, based on the selected aggregation period.


        5. The final Historical Volatility (HV) is obtained by applying this annualized scaling directly to the standard deviation.

         

        where:
        Pi – the price on the chosen period i
        Pi-1 – the price on the previous period
        n – the total number of the chosen period
        T – aggregation period

        Aggregation period (T)
        Month12
        Week52
        Day252
        Hour1,764 (252 trading days × 7 hours)
        Minute105,840 (252 × 7 × 60)
        Second6,350,400 (252 × 7 × 60 × 60)

        Candlestick chart with volume bars and Historical Volatility indicator shown as a blue line in the lower panel. The line reflects recent changes in price variability, with a noticeable increase in volatility during the price drop, followed by stabilization as the market recovers.Historical Volatility (HV)

         INPUTS

        InputDescription
        BasisAnnualization method. Available options: Annual, Monthly, Weekly, Daily
        LengthThe number of bars used to calculate the HV

        PLOTS

        The plot renders the data you are working with on the chart. You can show/hide a plot by clicking the corresponding item in the settings. Every plot has a set of basic settings you can change: color, weight, and type.

        PlotDescription
        HVThe Historical Volatility plot
        Color

        Click the color rectangle under the plot's name to open the palette. Use the slider at the bottom to set the opacity of the color.

        Palette
         To create a custom color:
        1. Clickto open the color picker
        2. By using the slider at the bottom, adjust the main color
        3. Then, set a shade for the main color on the palette

        The custom-created colors are added to your palette. To remove a custom color, drag it out of the palette.

        Weight
        Change the value (in px) to adjust the thickness of the plot.
        Type
        The following plot types are available:
        • Linear. The plot is displayed as a line.
        • Column. The plot is displayed as a histogram.
        • Difference. The plot is displayed as a line which represents the difference between High and Low prices of the bar.
        • Points. The plot is displayed as points.
        • Text above candle. The plot is displayed as the price labels above candles on the chart.
        • Text below candle. The plot is displayed as the price labels below candles on the chart.
        • Triangle above candle. The plot is displayed as triangles above candles on the chart.
        • Color candle. The candles on candle-type charts are highlighted with specified colors.

        OVERLAYING

        Check Overlaying to display the indicator on the main chart. Otherwise, the indicator is shown in a study pane down below.

        Note: To reset the settings, click Restore to Default next to the SETTINGS: INDICATOR'S TITLE
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