Volatility

Volatility measures how much an asset's returns scatter around their mean. The standard form is the standard deviation of a return series: vol = std(r). To compare strategies on different timeframes, annualize by scaling up: annual_vol = daily_vol x sqrt(365) for crypto (which trades every day including weekends). For hourly data: x sqrt(365 x 24).

Example. A BTC strategy produces daily returns with a standard deviation of 2.5%. Annualized volatility = 2.5% x sqrt(365) = approximately 47.8%. That means in a typical year the strategy's returns could swing roughly +/-48% around their mean.

Volatility is the denominator in the Sharpe ratio, so a lower-volatility strategy earns a higher Sharpe for the same average return. Crypto assets tend to carry 60-100%+ annualized volatility, far above equities, which amplifies both opportunity and risk.

Note that standard volatility treats up and down moves equally. If you want to penalize only downside moves, see the Sortino ratio. Use the Sharpe ratio calculator to compute annualized volatility alongside your risk metrics. Research output only — this is not investment advice.