Technicals Stability Returns

Related Tutorial On Technical Analysis
Most Volatile Share Rate of Change (ROC) Beta Stocks Chaikin Money Flow (CMF)
Average Directional Index (ADX) Accumulation Distribution Index (ADI) On Balance Volume (OBV) Bollinger Band
MACD Volume Pivot Point Moving Average basics

How to Use Volatility as a Tool to Make Profits in the Markets

What is volatility ?
Volatility is a measure of spread of share price range. Or in simpler words volatile stocks are those stocks that move in higher price band. These are also called high beta stocks. Please note that here we are not calculating beta value.

Calculation of Volatility

Though there are various measures to calculate volatility of stocks like standard deviation. For simplicity we will use a very simple formula.
It is Average of (High-low) period.

For example: If stock price of XYZ share is as shown in the table:
Its 3 days volatility on 3rd Jan will be{(105 - 96) + (110 - 104) + (113 - 104)}/3 = (9+6+9)/3 = 8.
This means on an average this stock has moved by 8 points every day for last three days.

Period of Volatility
A stock or any other asset can be volatile for a small period as low as few min to few months. In we use daily, weekly and monthly volatility.

Why Stock Suddenly Becomes Volatile?

There are many reasons for stocks to be very volatile. Some of them are:

How To Take Advantage Of Volatility.
(Novice traders should avoid it.)

1. For Intraday traders.

A stock as a result of some important news moves violently either up or down depending on the news impact. An example of positive news on stocks.

Typical trend to note here to take advantage of this price movement.
  1. Volume should reduce with every passing day.
  2. In candle stick, wick should be longer than body.

2. For swing traders with higher duration

Many stock apart from moving with high daily price fluctuation gives fluctuation on weekly/monthly period. These are the stocks that can be traded for good 5-15 % profit in relatively shorter period.

For such stocks, its best to identify whether stock is in sideways market. To identify such stock one can refer to almost flattish 50/100 day moving average. When ever the price is below this moving average To identify such stock refer to
Enter when they are near Price In Lower End Of Sideways Market By 50 Days SMAand
Exit when they are near Price In Higher End Of Sideways Market By 50 Days SMA
Also note that Volatility may proceed a major price movement.

Warning: In general, it is best to avoid share that are highly volatile. Only professional traders may try to take advantage of this.

If you feel confident to play such stocks then we strongly suggest to play with small capital and with a strict Stop loss . Other wise one wrong move can wipe out good portion of your capital.

Stock Screening Based On Volatility:
Related Technical Stock Screener
Most Volatile Share Daily Volatile Share 5 Days Daily Volatile Share 15 Days Daily Volatile Share 30 Days
Weekly Volatile Share 5 Weeks Weekly Volatile Share 10 Weeks Weekly Volatile Share 20 Weeks Weekly Volatile Share 50 Weeks
Monthly Volatile Share 3 Months Monthly Volatile Share 6 Months Monthly Volatile Share 6 Months Monthly Volatile Share 12 Months

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