Volatility refers to the statistical measure of the dispersion of returns for a  given security or market index, indicating the degree of variation in price movements  over time.

For example, if a stock's price fluctuates from ₹100 to ₹120 and then declines  to ₹85 within a week, this behavior illustrates high volatility.

How to Understand : 

Volatility serves as an indicator of market unpredictability; high volatility signifies  substantial price movement, while low volatility denotes relative price stability.

Importance :

It is instrumental for investors in assessing the inherent risk associated with specific  investments.

Volatility plays a crucial role in determining optimal entry and exit points for trading  strategies.

It significantly impacts the stability and performance of investment portfolios,  influencing overall risk management.

A comprehensive understanding of volatility is vital for devising safer and more strategic  investment plans.