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What is volatility clustering in trading?

Volatility clustering refers to the tendency of markets to experience periods of high volatility followed by high volatility, and low volatility followed by low volatility. This phenomenon is common in forex, where major news events can trigger sustained turbulent periods. Recognizing volatility clusters helps traders adapt position sizing and stop-loss strategies. Tools like Bollinger Bands or ATR (Average True Range) measure volatility patterns. Understanding clustering prevents traders from underestimating risk during volatile streaks or overreacting during calm phases. It is a key concept in modern risk management.