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 ?
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.