How to identify volatile of index and stocks?
Normally traders like the volatile market because they believe they can make huge profit in the volatile market. There is a chance to earn more profit by trading the stocks or index with a minimum stop loss which is highly volatile. Not only in future trading the same exists in the option trading. So how to find the volatility in the market if the situation is like this in the market. Few traders may easily find the volatility of the market and a large number of traders may find it difficult to find this volatility in the market.
There are many ways to identify the volatility of the market like India vix, put call ratio, oi, volume, delivery. Using this we can easily identify the volatility. We should not access the volatility using any one of the above. There is much information that is contained in this. For example, if a particular stock or index OI increases in future and options then that future or option is ready for volatile. Within three days of time, surely that stock or index will see a huge rise or fall. That stock will fall by creating a short build up and suddenly in future and option short covering will be created and the future and option will move up. When a stock is trading like this we should book the profit. When it is trading like this we should not concentrate only on OI, but we should also concentrate on put call ratio, volume, previous day OI and previous day high low.
How to make profit from volatility
If there is volatility in a particular stock or index, then we can trade by keeping minimum stop loss. But before that we should be able to find out whether that stock or index will move up or down by using the other techniques. Before trading we should be able to find out whether that particular stock or index will have a downside volatile or upside volatile. Then only we will be able to keep minimum stop loss and then we can trade for profit.
Disadvantage of volatile movements in markets
The main issue that exists in the volatile market is the stop loss will aften be triggered. Once the market is in high volatility the minimum stop loss that the trader’s fixed will be triggered often. This is due to the speed of the market. If a trader correctly identifies the movement of the future and option then the trader can easily gain more profit by keeping minimum stop loss.
Market volatile reasons
There may be many reasons technically for the volatility of the market and also there are many fundamental reasons for the volatility of the market. The fundamental reasons like election results, political changes, company financial announcements, company position changes and natural calamities may cause the market to be volatile. Due to these unexpected changes there are chances for the traders to gain more profit and at the same time suffer heavy loss.