How can traders capitalize on stocks or securities that display high volatility?

How can traders capitalize on stocks or securities


What it covers is…
Stock trading is not a piece of cake; the volatility can make or ruin the traders if they do not handle it meticulously. Investors can breach volatility as they play for the long term, but traders can only breach it at risk. Instead, traders can make volatility their friend and use it to capitalize on opportunities.

Volatility is also known as the separation of returns for an index over a period. Short-term traders evaluate volatility by taking the average difference between the everyday high and low divided by the stock price.

A discounted stock that exhibits a higher difference between the everyday high and low over a while will be more volatile than a premium stock that indicates the same difference over the same time.

Trading in volatile stocks offers the most profit potential but is simultaneously open to losses. Traders can recognize the market’s most volatile stocks with the help of a stock screener and take advantage of intraday price movements using short-term tactics to trade the propulsion.

Once the stock is recognized, traders can use options like calls and puts to take the primacy of the intra-day volatility as it will provide them good profits using small caps, unlike futures or cash trading, which acquire more capital.

The price of options relies on the future volatility of the underlying asset price. Traders will have several expectations regarding volatility, and this will regulate the tactics used by them.

However, volatility is essential to select a stock for trading and checking the volumes. Stocks with high trading volumes offer quick entry and exit opportunities in the market.

Traders can use several filters to reduce their search for a few stocks with the accurate combination of volatility and volume while gathering other necessary features like performance, market capitalization, etc., to give them the right intra-day opportunities.

Volatile stocks usually make precise moves, so it is essential to watch the small time frame chart for the correct entry point, followed by a quick exit to book profit. In addition, price action needs to be seen carefully for whether the price is making higher swing highs or lower swing lows to recognize which signals are adjoined for action.

Technical analysis can give traders a great chance to profit from winning trades by controlling volatility. Using accurate stock screeners can help traders to identify the right stocks with the help of tools like pre-set parameters and ensure they are on the positive side of the trade.

- Published By Team Australia News

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