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Historical Volatility Indicator Strategy, Set up, Features

Historical Volatility Indicator In Zerodha Kite

To know the Historical Volatility Indicator, first, we need to touch the basic concept of the term “Volatility”. It is the most important term, used in the stock markets. Many investors use the tool to manage their risk.

It is simpler terms, Volatility means the fluctuation in a stock’s or any other underlying’s price, over a specific period of time.

More About Volatility

Generally, we can divide the volatility into two categories. These are “Historical volatility” or HV and “Implied volatility” or IV. You can define the HV as the historical fluctuation in the price of a particular stock or commodity. And the term “Implied volatility”means the estimation of the volatility in the price. It is useful for many investors as well as traders.

One can measure the volatility of a index using the “VIX” or Volatility Index. In India, we use INDIAVIX to judge the volatility of the market.

What is the Historical Volatility Indicator?

The Historical Volatility indicator mainly used for estimation of future fluctuations in an asset. The risk associated with each asset could be measured by HV. The Volatility indicator is a little complicated and must have a defined time frame. It helps in estimating or calculating their risk. Traders are using the Historical Volatility indicator to know how volatile stock or an index will be in the future.

Historical Volatility FAQ

What historical volatility tells us?

Historical volatility or HV is a statistical measurement. This valuation is done on a given security or market index over a specific period of time. The higher the HV value, the riskier the security is.

What is the historical volatility ratio?

Simply, the historical volatility ratio is the percentage of short to long average HV. If a market’s short volatility declines below a particular percentage of its long volatility, that indicates an explosive move is about to happen.

What is the difference between implied volatility and historical volatility?

As the name implies Historical volatility looks at the actual asset prices in the past while IV or implied volatility looks ahead. In other words, IV is the expected future volatility of a security. It is plied by the price of the stock’s options.

How can We Set up Historical Volatility Indicator on Charts?

If you do not learn to use the indicator properly, it is of no use. So, here comes the practical part of the content, how you can set up an HV indicator on charts. For clear instance, I hereby add two charting platforms simultaneously. First, let’s go for Zerodha, then Upstox Pro.

Zerodha Kite with Historical Volatility

Historical Volatility indicator is available under the studies section in Zerodha Kite. One can attach this technical indicator and the default parameter of this indicator is 10 periods. One can also input the trading days in a year and also input the standard deviation value.

Historical Volatility Indicator In Zerodha Kite

Here, I set the RELIANCE 1-day chart. The customization options are present in the fields, period, days per year, standard deviations and color. You can change or modify them as per your choice.

Historical Volatility

Upstox Pro with Historical Volatility

Here, the system is as same as the Zerodha kite. First, log in to Upstox pro, then open HV. Here, also, customize options are available. After setting up, just click on the apply option.

Historical Volatility Indicator

What are the Ways to Make High Return by Using the HV Indicator?

Any of the technical tool’s primary objective is to predict the upcoming trend in the market. And, Hv is also no exception. So, here is the list of HV strategies by which you can make high returns from the market.

Best HV Strategies to Make High Returns

  • In this indicator, if a stock that has lesser historical volatility than the others, it tends to be less volatile and more stable in the coming future.
  • This indicator use to buy a stock low and sell high because the particular stock is exhibiting higher volatility and hence, the range for the stock is higher than the others.
  • Many traders and investors can make higher profits when volatility is higher.
Historical Volatility Indicator
  • For the trending markets, historical volatility or HV measures how far traded prices move away from a central average, or moving average, price.
  • HV does not measure direction, it measures how much the securities price is deviating from its average.
  • If a security’s HV is falling, things are returning back to normal (i.e. uncertainty has been removed).

Advantages & Disadvantages of HV Indicator

Here, are the advantages and disadvantages of HV.

Main advantages of Historical Volatility Indicator :

  1. “Historical Volatility” is used by many investors to manage their portfolios as well as their risks and goals.
  2. Traders also use the indicator for selecting high beta stocks for trading purposes.
  3. It is used to estimate future volatility in a particular stock or an index.

Disadvantages of HV

  1. HV is not necessary for a stock’s volatility to always follow its historical volatility.
  2. The assumptions used while calculating the Historical volatility of a stock, tend to deteriorate the perfect value of it on a short-term basis.


However, throughout the world, HV is an important technical term, used by investors. In this indicator, many professionals do waste a good amount of time in defining their time frames. That is definitely essential and returns for the selected stock must be calculated. Hence, the classification of HV as a subject in technical analysis can’t be done, as it doesn’t suit any of the technical analysis categories. It is a standard deviation. Historical Volatility indicator can rather be called as an investor’s tool to manage risk. We suggest using this on either daily, weekly or monthly time frame to calculate the volatility of that time frame. To get more updates about it, follow our blog post.

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Avinash Jawalkar

Please also post an article on Chaikin Volatility which is there in Zerodha Pi 7 how to use it for trading.