Financial markets are an important part of every economy. The main players of stock markets are traders, firms, speculators, brokers, and government. The uncertainty or the volatility can be seen in the market on any event related to the above players of the stock market. Volatility is a technical term which measures the dispersion of return on the market index or a particular security. The statistical tools like standard deviation and variance can be used to determine the volatility of the market. It is very risky to trade in a highly volatile market. The market behaves abruptly and abnormally in a high volatility condition.
The reason of high volatility is the players of the stock market and in particular speculators. The speculators based on emotions and greed involvement in the trades and due to general sentiments about the market induces volatility in the market. There is a part of volatility due to the investors. The volatility is due to the lack of knowledge and inexperience of the investors. Their decision brings a considerable amount of volatility in the market. The volatility induced by the business firm can make the market more volatile. The decision of the top management, as well as poor regulatory reforms by the government, will be responsible for the volatility of the market. Global economic conditions also affect the ups and downs in the market. Also, various government policies have a major effect on the volatility of the market.
It is always beneficial to trade with caution in the volatile market. The traders can rely upon the advice from the stock advisory firms for the accurate stock market tips. These advisory firms have expert financial analysts. They on the basis of their accurate analysis provide buy and sell signals even in volatile as well as non-volatile markets. Also, the trader is advised to trade with the strict stop loss in case of the volatile market to prevent incurring from heavy losses.