Volatility and Returns

[currencyfxjle]

Volatility and Returns have a strong relatonship, the basic hyphotesis is that large returns produce high volatility periods, and one way to identify correctly is using the polynomials to avoid giving too much relevance to fluctuations and focus on the predominant biased trend produced by returns

 

[pippin]

Can you please explain how volatility affects returns of vice versa? As far as I understand increased volatility is just magnitude of returns gets bigger and stays large for some times. This is known as volatility clustering.

 

[Fin_Trader]

The higher the volatility of a trading pair, the higher the potential income. That is, when the price moves by a sufficiently large number of points in a short period of time, we can earn more during this time. But we should not forget about the negative side of such trading - increased risks. That is, here, both the profit can be large if we made the right entry into the market, and the loss will also be impressive if the transaction turns out to be incorrect.