Volatility — Return
Annualized standard deviation of daily returns on the Return equity curve. Higher volatility = more unpredictable equity behavior.
- Computed from
- Equity curve
- Scope
- Single report
- Range
- ≥ 0
- Direction
- Lower is better
The volatility of an account is how much its returns bounce around — the standard deviation of those returns, stretched to a one-year figure so every account is compared on the same scale. In plain words, standard deviation is the typical distance a day's return sits from its average: a small number means a calm, steady curve; a large number means big swings in both directions. (For example, daily returns of +1%, −1%, +1%, −1% have a standard deviation of about 1%.)
This is realized (historical) volatility — measured from the equity curve that actually happened. It is not implied volatility (the forward-looking figure the options market prices in). Here, "vol" always means realized.
How it's calculated
Take the standard deviation of the day-to-day returns, then annualize it — stretch the daily figure to a yearly one by multiplying by the square root of the number of trading days in a year (≈252 for forex). That square-root scaling is why a ~1% daily wiggle becomes a ~19% annual volatility.
Volatility = stdev(daily returns) × √(trading days per year)
- daily returns
- the low-to-low return of the equity curve, one per trading day
- stdev
- the standard deviation — the typical distance from the average return
- trading days per year
- derived from the data: ≈252 for forex (5 days/week), ≈365 for crypto (7 days/week)
ddof = 1) of those daily returns, annualized by the square root of the record's own trading days per year — computed from the data, not a hardcoded 252 (so a 7-day-a-week crypto record annualizes by ≈365). Because it's sampled from the intraday equity low rather than the daily close, it can read slightly higher than a plain close-to-close vol — it captures intraday path, not just day-end marks. Reported as an annual percentage on the Return and TWR curves.On the Return curve volatility is the dispersion of your money-weighted daily returns, as an annual percent. Deposits and withdrawals move the curve, so this is the wobble you personally experienced.
What it tells you
These are general-market bands. Leveraged retail forex routinely runs far hotter — 30–80%+ annual volatility is common on a 1:100 account, so a figure that looks alarming on an equity-fund scale can be ordinary here. Read the band relative to the account's leverage, not in absolute terms.
| Value | Reading | Notes |
|---|---|---|
| < 10% | Calm | A smooth ride — but check it isn’t simply barely trading. |
| 10 – 25% | Moderate | Comparable to a broad equity index. Tame for an active forex account. |
| 25 – 50% | Active | Big swings, but routine for leveraged forex. Read with leverage in mind. |
| > 50% | Hot | Large dispersion — read alongside max drawdown and leverage; common on aggressive retail accounts. |
Lower is smoother, not automatically better — a flat, slowly-losing account is calm too. Volatility only tells you the size of the ride, never whether it's going the right way. Always read it next to the return it bought.
Worked example
Say a forex account's daily returns have a standard deviation of 1.2%. With ≈252 trading days a year (the forex value — a crypto record would use ≈365):
Volatility = 1.2% × √252 = 1.2% × 15.87 ≈ 19%
A 1.2% daily wobble annualizes to roughly 19% — in the range of a broad equity index, and on the quiet side for a leveraged forex account. A more aggressive account with a 3% daily standard deviation would land near 48% (3% × √252), deep into leveraged-forex territory.
Pitfalls
- Calm can hide a tail — low realized vol is not low risk. A strategy that sells volatility, martingales, or grids collects small steady gains — picking up pennies — and shows beautiful low volatility with a smooth curve, right up until the one move that isn't smooth. Realized vol measures dispersion that already happened; it cannot see the tail that hasn't fired yet. Pair low vol with max drawdown and trade-shape checks before trusting it.
- Symmetric — it punishes big wins too. A handful of huge winning days raise volatility exactly as much as huge losing ones. Sortino counts only the downside if that asymmetry matters to you.
- Says nothing about drawdown depth or path. Two accounts with identical volatility can have wildly different max drawdowns — one bleeds evenly, the other in one brutal stretch. Read them together.
- Annualization assumes day-to-day independence. The √-time scaling supposes each day's return is unrelated to the next. A trending or autocorrelated strategy breaks that and the number understates true risk; a mean-reverting one breaks it the other way and overstates.
- Not a measure of return. A flat, losing account can have low volatility. Volatility only describes dispersion.
Volatility and Sharpe
Volatility is the denominator of the Sharpe ratio: Sharpe = average return ÷ volatility, on the same series. The relationship is direct — halve an account's volatility while holding its return constant and you double its Sharpe. That's why two accounts with the same return can score very differently: the smoother one is rewarded for its lower volatility. Pros also use volatility the other way around, as a sizing input — vol-targeting scales position size inversely to realized volatility to keep risk roughly constant as conditions change.
Related
Volatility is the broadest risk measure; its companions refine it: the Sharpe ratio sets return against it, the Sortino ratio counts only downside dispersion, and max drawdown captures the single worst peak-to-valley fall rather than the average swing.