No one can accurately predict the future but a knowledge of past behavior can be used as a guide to help make informed decisions of what is likely to happen next. With this idea in mind, Historical Volatility measures the variance of the changes in a security over time.

Traders generally tend to start looking at volatility over a long time, at least ten years. This allows identification of short-term deviations from normal activity. That being said, one should not overlook short-term volatility either. If a commodity has averaged 20% volatility over the last year but only 10% over the past thirty days, it might be wise to adjust the volatility estimates to accommodate the most recent data.