How to Use Technical Indicators to Trade Volatile Assets - Part 3

How to Use Technical Indicators to Trade Volatile Assets - Part 3

Submitted by adil on Fri, 08/08/2014 - 17:30

Getting Advanced With Volatile Assets

In the last part of the tutorial, we will discuss volatility, what stock traders should know about it and how to find the perfect high-volatile stock that will guarantee increased profit margins.

The concept of volatility:

Every trader wants to know: “How to decide whether one asset is more volatile than some other?” The interesting fact is, it is very easy to know. The stock whose price movement goes up and down by $5 when its price is $50, is more volatile as compared to the stock whose daily high and daily low price varies by $5 when its price is $150. It means when deciding how much a stock is volatile, the trader must correlate the price fluctuations with the stock’s base price.

What a stock trader should know:

Every trader pretty much knows the standard definition of volatility. But very few really understand how volatility affects their profit making chances. If you have good experience in stock trading then you should be able to easily trade volatile stocks. The problem a trader will experience when making such trades are:

1. The risks increase as the prices fluctuate quickly and a winning position can turn into a losing one without giving trader any chance to readjust.
2. Most online tutorials are for educating new traders, hence their advice is to refrain from trading volatile stocks. It is this reason, you will not easily find required guidance everywhere.
3. The trader doesn’t know which stocks are currently very volatile. Even if he gets this information, he doesn’t know which stock is the best among them.

Solutions: The solution to first problem is experience and practice which a trader will only gain with time, there is no other way. The solution to second problem is easier. You can find tutorials on this website that contain thoroughly researched material for expert traders. The solution to third problem is given below.

How to find the most volatile stock:

You can use various filters available online to screen the most rewarding and the most volatile stocks. The two tasks that you should do when finding such stocks:

• Check how long the stock has remained volatile, the stock should be consistently volatile to be the best one.
• It is also important to keep an eye on the trading volume of the stock, greater the volume, the easier it will be to enter and exit.

Stock Fetcher is one of the best paid filters that can be used to get the assets remaining volatile over a long period of time. There are numerous variables which you can set according to your trading style and you will get filtered results within seconds.

FINVIZ is a free online filter that provides the needed information about an asset on a daily scale. You can control the filtered results according to performance, volume and market capitalization.

NASDAQ also provides lists of top gainers and performers, but the results are not filtered and only for a single day. A lot of manual work is required to get the required information.

Volatility is very good if you want to make considerable money with short-term stock trading. The trader just needs to know the tools and strategies to fully benefit from the high volatile assets.