What is Volatility
You have heard people saying , market is volatile now , but what they really mean ? lets take closer look at it and understand volatility.
Introduction to Volatility
Please Scroll Down to End to Continue
The rate at which stock goes up or down is called as volatility. It is the degree at which stock prices moves up or down over a period of time . In clear words volatility is a uncertainity in a prices of stocks . When prices are so random , they goes up in 10 min and goes down in next 10 min. It is a fluctuation in prices due to liquidity , news factors etc. Low stock volatility means low risk and higher returns , but high volatility means high risk and lower returns.
How Volatility Impacts?
Higher the volatility means high the fluctuations in the stock prices which means high risk and low profit . Lower volatility means lower fluctuations low risk and higher returns . Volatility is a very important part of traders life . But for long terms investors it not factor of concern , because it is the factor of short term ,in long period of time stocks always go up. Higher volatility causes stocks prices to fall , due to which we get good prices for long term investment.
What cause stock volatility ?
Stock market volatility is largely depends on news factors , government policies , change in repo rates, tax changes and other national and international factors.
It is also dependant on economic factors such as GDP numbers , monthly job reports , tax collections.
Stock volatility in stocks is caused by announcements , results , profits , new policies related to sector .
Volatility is also depends upon uncertain factors such as war , natural disasters , diseases like Covid19 .
How to Prevent from market volatility ?
Invest in blue chip stocks as they are less volatile .
It is very important to timely book your profits .
Dont miss the trending stocks .
Always use stoploss to protect your investments.