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Trading Volatile Stocks

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Trading Volatile Stocks

Trading volatile stocks can be very profitable. Trading volatile stocks can also be treacherous to those not skilled in the use of technical analysis of stock prices. Trading volatile stocks is the province of technical traders and is best engaged in by those skilled in the use of Candlestick analysis. The price of a stock is volatile when fundamental analysis is uncertain and traders are all over the board with their opinions as to where the price will go next. It is in these situations that Candlestick chart analysis excels in predicting stock price movement. This works because, even when trading volatile stocks, stock price patterns repeat themselves. Using technical analysis tools like Candlestick pattern formations allows the trader to benefit from the learned lessons of history. Using Candlestick trading tactics when the market is volatile can allow traders to profit from uncertainty of others. It allows traders to benefit from anticipating the results of when other traders fall prey to the trading psychology of fear and greed that can fell an otherwise skillful trader.

The point of trading volatile stocks is that there is potential profit in the large rises and falls in stock price during chaotic trading. A useful adjunct to reading market movement with Candlestick patterns is to engage in options trading while the market is volatile. When buying calls or buying puts on a stock the trader limits his investment risk to the premiums paid for each call or put. He, nevertheless, can profit greatly when a stock price moves in the direction that his Candlestick chart formations imply that it will. In the case of a call option the trader pays for the right to buy 100 shares of stock per options contract. He will do so if the price of the stock moves significantly above the strike price of the options contract. As he is under no obligation to buy the stock he will only lose the price paid for the contract if the stock price goes down. When the trader buys a put on a stock he pays for the right to sell 100 shares of the stock, which he will do if it goes down in price. As with a call option he is under no obligation to exercise the contract and will only lose the price of the premium if his analysis of the stock price turns out to be incorrect.



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  • 1. www.CandlestickForums.comwww.CandlestickForums.com TradingTrading Volatile StocksVolatile Stocks
  • 2. www.CandlestickForums.comwww.CandlestickForums.com Trading volatile stocks can be veryTrading volatile stocks can be very profitable.profitable.
  • 3. www.CandlestickForums.comwww.CandlestickForums.com Trading volatile stocks can also beTrading volatile stocks can also be treacherous to those not skilled in the usetreacherous to those not skilled in the use of technical analysis of stock prices.of technical analysis of stock prices.
  • 4. Before We Continue…Before We Continue… Click the links below to get yourClick the links below to get your FREE training materials.FREE training materials. Free Weekly Investing WebinarsFree Weekly Investing Webinars Don’t miss these free training events!Don’t miss these free training events! http://http://www.profitableinvestingtips.comwww.profitableinvestingtips.com /free-webinar/free-webinar Forex Conspiracy ReportForex Conspiracy Report Read every word of this report!Read every word of this report! http://www.forexconspiracyreport.comhttp://www.forexconspiracyreport.com
  • 5. www.CandlestickForums.comwww.CandlestickForums.com Trading volatile stocks is the province ofTrading volatile stocks is the province of technical traders and is best engaged intechnical traders and is best engaged in by those skilled in the use of Candlestickby those skilled in the use of Candlestick analysis.analysis.
  • 6. www.CandlestickForums.comwww.CandlestickForums.com The price of a stock is volatile whenThe price of a stock is volatile when fundamental analysis is uncertain andfundamental analysis is uncertain and traders are all over the board with theirtraders are all over the board with their opinions as to where the price will go next.opinions as to where the price will go next.
  • 7. www.CandlestickForums.comwww.CandlestickForums.com It is in these situations that Candlestick chartIt is in these situations that Candlestick chart analysis excels in predicting stock priceanalysis excels in predicting stock price movement.movement.
  • 8. www.CandlestickForums.comwww.CandlestickForums.com This works because, even when tradingThis works because, even when trading volatile stocks, stock price patterns repeatvolatile stocks, stock price patterns repeat themselves.themselves.
  • 9. www.CandlestickForums.comwww.CandlestickForums.com Using technical analysis tools likeUsing technical analysis tools like Candlestick pattern formations allows theCandlestick pattern formations allows the trader to benefit from the learned lessonstrader to benefit from the learned lessons of history.of history.
  • 10. www.CandlestickForums.comwww.CandlestickForums.com Using Candlestick trading tactics when theUsing Candlestick trading tactics when the market is volatile can allow traders to profitmarket is volatile can allow traders to profit from uncertainty of others.from uncertainty of others.
  • 11. www.CandlestickForums.comwww.CandlestickForums.com allows traders to benefit from anticipatingallows traders to benefit from anticipating the results of when other traders fall preythe results of when other traders fall prey to the trading psychology of fear andto the trading psychology of fear and greed that can fell an otherwise skillfulgreed that can fell an otherwise skillful trader.trader.
  • 12. www.CandlestickForums.comwww.CandlestickForums.com The point of trading volatile stocks is thatThe point of trading volatile stocks is that there is potential profit in the large risesthere is potential profit in the large rises and falls in stock price during chaoticand falls in stock price during chaotic trading.trading.
  • 13. www.CandlestickForums.comwww.CandlestickForums.com A useful adjunct to reading marketA useful adjunct to reading market movement with Candlestick patterns is tomovement with Candlestick patterns is to engage in options trading while the marketengage in options trading while the market is volatile.is volatile.
  • 14. www.CandlestickForums.comwww.CandlestickForums.com When buying calls or buying puts on a stockWhen buying calls or buying puts on a stock the trader limits his investment risk to thethe trader limits his investment risk to the premiums paid for each call or put.premiums paid for each call or put.
  • 15. www.CandlestickForums.comwww.CandlestickForums.com He, nevertheless, can profit greatly when aHe, nevertheless, can profit greatly when a stock price moves in the direction that hisstock price moves in the direction that his Candlestick chart formations imply that itCandlestick chart formations imply that it will.will.
  • 16. www.CandlestickForums.comwww.CandlestickForums.com In the case of a call option the trader paysIn the case of a call option the trader pays for the right to buy 100 shares of stock perfor the right to buy 100 shares of stock per options contract.options contract.
  • 17. www.CandlestickForums.comwww.CandlestickForums.com He will do so if the price of the stock movesHe will do so if the price of the stock moves significantly above the strike price of thesignificantly above the strike price of the options contract.options contract.
  • 18. www.CandlestickForums.comwww.CandlestickForums.com As he is under no obligation to buy theAs he is under no obligation to buy the stock he will only lose the price paid forstock he will only lose the price paid for the contract if the stock price goes down.the contract if the stock price goes down.
  • 19. www.CandlestickForums.comwww.CandlestickForums.com When the trader buys a put on a stock heWhen the trader buys a put on a stock he pays for the right to sell 100 shares of thepays for the right to sell 100 shares of the stock, which he will do if it goes down instock, which he will do if it goes down in price.price.
  • 20. www.CandlestickForums.comwww.CandlestickForums.com As with a call option he is under noAs with a call option he is under no obligation to exercise the contract and willobligation to exercise the contract and will only lose the price of the premium if hisonly lose the price of the premium if his analysis of the stock price turns out to beanalysis of the stock price turns out to be incorrect.incorrect.
  • 21. www.CandlestickForums.comwww.CandlestickForums.com In trading volatile stocks a useful tradingIn trading volatile stocks a useful trading strategy is to buy both a call and a put onstrategy is to buy both a call and a put on the same stock with the same expirationthe same stock with the same expiration date.date.
  • 22. www.CandlestickForums.comwww.CandlestickForums.com The trader can profit from either directionThe trader can profit from either direction that the stock price moves.that the stock price moves.
  • 23. www.CandlestickForums.comwww.CandlestickForums.com Using this strategy, known as a longUsing this strategy, known as a long straddle, his only loss will occur if marketstraddle, his only loss will occur if market volatility suddenly disappears and thevolatility suddenly disappears and the stock price does not change significantlystock price does not change significantly enough to cover the premiums paid.enough to cover the premiums paid.
  • 24. www.CandlestickForums.comwww.CandlestickForums.com Using options helps limit risk in trading aUsing options helps limit risk in trading a volatile market.volatile market.
  • 25. www.CandlestickForums.comwww.CandlestickForums.com So does the skillful use of CandlestickSo does the skillful use of Candlestick signals.signals.
  • 26. www.CandlestickForums.comwww.CandlestickForums.com It is the market inefficiency of a volatileIt is the market inefficiency of a volatile market that leads to trading profits for themarket that leads to trading profits for the astute Candlestick trader usingastute Candlestick trader using Candlestick basics to read stock priceCandlestick basics to read stock price patterns.patterns.
  • 27. www.CandlestickForums.comwww.CandlestickForums.com In a fast paced market with theIn a fast paced market with the fundamentals changing and uncertain,fundamentals changing and uncertain, there are periods of delay when thethere are periods of delay when the market catches up and gains consensus.market catches up and gains consensus.
  • 28. www.CandlestickForums.comwww.CandlestickForums.com During these times the market may goDuring these times the market may go through a large number of readable pricethrough a large number of readable price patterns, all of them profitable to trade ifpatterns, all of them profitable to trade if the trader uses the skill set learned fromthe trader uses the skill set learned from studying Candlestick chart patterns.studying Candlestick chart patterns.
  • 29. www.CandlestickForums.comwww.CandlestickForums.com There are often more, and better, tradingThere are often more, and better, trading opportunities in a short span of a volatileopportunities in a short span of a volatile market than in days, weeks, and evenmarket than in days, weeks, and even months of a quiet market.months of a quiet market.
  • 30. www.CandlestickForums.comwww.CandlestickForums.com Although someone accustomed to long termAlthough someone accustomed to long term investing may stay at home during suchinvesting may stay at home during such an active market, the savvy Candlestickan active market, the savvy Candlestick trader will engage the market and profit.trader will engage the market and profit.