How can we know about the direction of volatility?

<p id="isPasted">Volatility is a measure of the magnitude and speed of price changes, not the direction of those changes. An asset can be highly volatile while moving up or down, or it can have low volatility and remain relatively stable. While volatility itself doesn't indicate a direction, certain indicators and market behaviors can offer clues about potential directional moves.&nbsp;</p><p><strong>Volatility and price direction indicators</strong></p><ul><li>Implied volatility: This is derived from options pricing and indicates the market's expectation for future volatility. A rapid rise in implied volatility, often seen with a falling market index like the S&amp;P 500, can be interpreted as rising investor fear and a possible negative market direction.</li><li>Relative Volatility Index (RVI): This indicator, developed by Donald Dorsey, is specifically designed to calculate the direction of an asset's volatility. It compares the standard deviation of up and down price movements and can signal buying or selling opportunities depending on whether the index is above or below a central level of 50.</li><li>Bollinger Bands: These bands expand during periods of high volatility and contract during periods of low volatility. A sharp price breakout above or below the bands after a period of low volatility can signal a new directional move.</li><li>Average True Range (ATR): This indicator measures the average price range over a set period, reflecting the market's volatility. While it doesn't show direction on its own, a spike in ATR often coincides with significant trend changes or reversals.</li><li>Technical analysis: Observing price action in combination with volatility indicators can provide insight. For instance, a high-volatility breakout from a low-volatility period can signal a strong directional move in the direction of the breakout. </li></ul>