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+732 Part VI: Measuring and Trading Volatility 
+al volatility was lower, then when you make the volatility prediction for tomorrow, 
+you'll probably want to adjust it downward, using the experience of the real world, 
+where you see volatility declining. This also incorporates the common-sense notion 
+that volatility tends to remain the same; that is, tomorrow's volatility is likely to be 
+much like today's. Of course, that's a little bit like saying tomorrow's weather is likely 
+to be the same as today's (which it is, two-thirds of the time, according to statistics). 
+It's just that when a tornado hits, you have to realize that your forecast could be wrong. 
+The same thing applies to GARCH volatility projections. They can be wrong, too. 
+So, GARCH does not do a perfect job of estimating and forecasting volatility. In 
+fact, it might not even be superior, from a strategist's viewpoint, to using the simple 
+minimum/maximum techniques outlined in the previous section. It is really best 
+geared to predicting short-term volatility and is favored most heavily by dealers in 
+currency options who must adjust their markets constantly. For longer-term volatility 
+projections, which is what a position trader of volatility is interested in, GAR CH may 
+not be all that useful. However, it is considered state-of-the-art as far as volatility pre­
+dicting goes, so it has a following among theoretically oriented traders and analysts. 
+MOVING AVERAGES 
+Some traders try to use moving averages of daily composite implied volatility read­
+ings, or use a smoothing of recent past historical volatility readings to make volatility 
+estimates. As mentioned in the chapter on mathematical applications, once the com­
+posite daily implied volatility has been computed, it was recommended that a 
+smoothing effect be obtained by taking a moving average of the 20 or 30 days' 
+implied volatilities. In fact, an exponential moving average was recommended, 
+because it does not require one to keep accessing the last 20 or 30 days' worth of data 
+in order to compute the moving average. Rather, the most recent exponential mov­
+ing average is all that's needed in order to compute the next one. 
+IMPLIED VOLATILITY 
+Implied volatility has been mentioned many times already, but we want to expand on 
+its concept before getting deeper into its measure and uses later in this section. 
+Implied volatility pertains only to options, although one can aggregate the implied 
+volatilities of the various options trading on a particular underlying instrument to 
+produce a single number, which is often referred to as the implied volatility of the 
+underlying.