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How to Trade Volatile Stocks

Charlie S Apr 21, 2019
Trading volatile stocks is not child's play. These are the stocks, which show sudden and drastic, rise and fall in their prices.
Volatile stocks have always made news in the markets across the world. They rise very fast in the bull market phase and give huge returns, which you may never get in frontliner stocks. But should you trade such stocks? If you're willing to, let us understand how to trade them.

Track them Carefully

Tracking them on a daily basis is imperative to reap profits. They should be tracked using intra-day charts. Try to study their intermediate highs and closing highs, try to predict how they will open the next day. Note down daily closing prices for future reference.

Prepare Technical Charts

Technical charts on daily, weekly, monthly basis are available on various sites. If you prepare them yourself, you will know exactly which will give you great returns. Based on the price data, prepare a chart and study rises and falls carefully.

Decide which Ones to Buy

While trading volatile, you should avoid investing in stocks, which have already had a great run-up in the last few days. Instead, you should choose the one which has witnessed increasing volumes. This is because, stocks whose prices have risen can experience heavy profit booking, and can come crashing down within minutes.
Before trading, you should observe what is the 52 week high/low, market cap, financial quarterly, annual results, and historic prices of the respective stock.

Decide how much to Invest

Deciding on how much money to invest is difficult because, we are often tempted to invest more to get fast and more returns. At the same time, we do recall the history when such stocks wash off all the money in a few hours. A suggestion would be to invest not more than fifteen percent of your total money in such stocks.

Decide when to Sell

Getting out of volatile stocks at the right time with profits in hand is very essential. It should not happen that, you do not book your profits, and the stocks settle down below your purchase price. For this, careful observation, research, and good reflexes are required.

High-frequency Trading

High-frequency trading has emerged as a volatile option off late. It means the trading carried out with the help of ultra-fast computers with a specific algorithm. Such trading has become volatile due to the risk it presents to the investors. Hence, care should be taken while exercising this option.
Disclaimer: This information is just for reference purposes and does not recommend any stock market transactions.