According to Gann theory, volatility can be divided into upward volatility calculation method and downward volatility calculation method.

1. The volatility of the upward trend is calculated as follows: In the upward trend, the distance between the bottom and the bottom is divided by the interval between the bottom and the bottom, and rounded off.

Rising volatility = (second bottom-first bottom)/time distance between two bottoms

2. The calculation method of volatility of downtrend is: in downtrend, the distance between tops is divided by the interval between tops, and rounded off. And use them as coordinate scales to draw on paper.

Volatility decrease = (second top-first top)/time distance between two tops

Types of stock market volatility:

1, actual volatility

Actual volatility, also known as future volatility, refers to the measurement of the fluctuation degree of investment income within the validity period of options. Because the return on investment is a random process, the actual volatility is always unknown. In other words, the actual volatility cannot be accurately calculated in advance, and people can only get its estimated value through various methods.

2. Historical fluctuations

Historical volatility refers to the volatility of the return on investment in the past period, which is reflected by the historical data of the market price of the underlying assets in the past period (that is, the time series data of st). That is to say, according to the time series data of {St}, we can calculate the corresponding volatility data, and then estimate the standard deviation of the rate of return through statistical inference, so as to get the estimated value of historical volatility.

Obviously, if the actual volatility is a constant and does not change with time, then the historical volatility may be a good approximation of the actual volatility.

3. Forecast volatility

Predicted volatility, also known as expected volatility, refers to the result of predicting actual volatility by statistical inference, which is used in option pricing model to determine the theoretical value of options.

Therefore, the forecast volatility is the volatility that people actually use when pricing options in theory. In other words, the volatility used in discussing option pricing generally refers to the forecast volatility. It should be noted that the predicted volatility is not equal to the historical volatility.

4. Implied volatility

Implicit volatility is investors' understanding of actual volatility when trading options, which has been reflected in the pricing process of options. Theoretically, it is not difficult to obtain implied volatility.

Because the option pricing model gives the quantitative relationship between the option price and five basic parameters (St, X, R, T-t, σ), as long as the first four basic parameters and the actual market price of the option are substituted into the option pricing model as known quantities, the only unknown quantity σ can be solved, and its size is the implied volatility. Therefore, implied volatility can be understood as the expectation of actual volatility in the market.

Reference link: Baidu Encyclopedia: Volatility Index