Volatility is a key concept in stock trading and refers to the degree of variation, or fluctuation, observed in the price of a financial instrument over a certain time period. It is often expressed as a percentage and is a crucial indicator of the risk or stability involved in investing in a particular stock.

If a stock has high volatility, this means its price changes frequently in a short period, indicating a greater potential risk, but also the possibility for significant returns. If prices are subject to rapid and significant price increases, the stock has high volatility and a high potential for profit or loss. Conversely, a stock with low volatility has smaller and less frequent price changes, implying a more stable, though potentially less profitable, investment.

Volatility is an important factor for traders to consider when deciding where to place their money, especially for short-term traders who rely on price changes to make a profit. Understanding and monitoring volatility can be a powerful tool for managing market risk.