Trading in volatile market generates good revenue for the traders because of quick changes in momentum of the stock price. However, it is excellent to hold the stock even in the volatile market. If a trader is confident in their strategies.
The volatility is an arithmetic measure of the market’s tendency to rise. Or fall very quickly in a short span of time. The volatility of the market is evaluated arithmetically by the standard deviation of the profit gained from the investment. The standard deviation is fundamentally a concept of statistics. This concept represents the variation or deviation, that is anticipated by the analysts.
Large price variation and intense trading illustrate the volatile markets. In a volatile market, the traders are given orders to trade in one single direction. As a result of an imbalance of trade. For example, the traders are given orders for either “all buy no sell” or “all sell no buys”. There are many factors, which are responsible for the volatility in the market of stocks and commodity. Some of the reasons causing volatility are the release of economic factors, company news, and suggestions from analysts. Volatility is necessary for traders to get profit. The sluggish market is not beneficial for anyone in any way. Traders need volatility but with hint.
However, the traders, who have just started with trading, must never be active in the very volatile market. They will not predict the changes in the market and hence will do blunder. Volatility may hurt the traders, who do not trade with strict stop loss. If volatility causes disadvantage, on the other hand, it also causes the advantage. Traders can take advantage of volatility by trading the small charts like 15-minute charts or 5-minute charts. The smaller the time frame of the chart, a faster trader can view the change of momentum in a stock price.