Trading Volatile Stocks with Technical Analysis

Trading Volatile Stocks
with Technical Analysis
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/trading-volatile-stocks-with-technical-analysis
The US stock market is just
finishing its most volatile week
ever.

Automated trading programs
seem to be driving stocks up
and down in large steps.

This is dangerous territory for
investors and an ideal
opportunity for short term day
traders.

Trading volatile stocks with
technical analysis may result
in significant profits during
such times.

What Is Volatility?

According
to investopedia, volatility is
the range of prices for a given
stock or index.

it is quantified by short-term
traders as the average
difference between a stock’s
daily high and daily low,
divided by the stock price.

a stock that moves $5 per day
with a $50 share price is more
volatile than a stock that
moves $5 per day with a $150
share price, because the
percentage move is greater
with the first.

trading the most volatile
stocks is an efficient way to
trade, because theoretically
these stocks offer the most
profit potential.

The key to trading volatile
stocks with technical analysis
and making money is finding
the stocks to trade and
correctly using technical
indicators to trade them.

One only needs to run a stock
screen for volatility and
volume to find stocks to trade.

What is Technical
Analysis?

Technical analysis is the
reading of price patterns in
order to predict the next
market movement.

These price patterns have
statistical significance and are
based on many previous
market situations.

volatile stocks are prone to
sharp moves, which require
patience in awaiting entries
but quick action when those
entries appear.

as with any stock, trading
volatile stocks that are
trending provides a directional
bias, giving the trader an
advantage.

certain indicators can be used
to trade volatile stocks

but the trader must also
monitor price action –
watching if the price is making
higher swing highs or lower
swing lows relative to prior
waves – to determine when
indicator signals are taken and
when they are left alone.

There are many technical
indicators but knowing how to
use one or two to their best
advantage is a better approach
than trying to use too many
and becoming confused by
their predictions.

Trading Volatile
Stocks with Technical
Analysis in Today’s
Market

The eventual price of a stock is
determined by its earnings and
prospects of future earnings.

But, the short term price of
the stock is based on the
market’s opinion of how likely
earnings are to rise or fall.

Over the last few years the big
tech stocks have led the
market and always were the
most likely to take a hit when
the market corrected.

A smart technical trader will
keep this in mind when trading
the ups and downs of the
current market.

business insider looks at
how tech stocks got
mauled and which ones are
likely to be hurt worse.

the losses were widespread,
and even the faang basket –
facebook,apple, amazon,
netflix, and google parent
alphabet – wasn’t spared.

apple (-12%) and google (-
5%) are down for the year,
and facebook (-27%) has
fallen off a cliff.

meanwhile, amazon (+18%)
and netflix (+21%) are still
higher, but they’re well off
their highs.

and while faang stocks have
been hit hard, there are other
names that have fared far
worse.

two types of companies –
chinese tech and
semiconductors – were among
the hardest hit, as uncertainty
around the us-china trade war
and slowing global growth
weighed on investor
sentiment.

Here is where knowledge of
stock fundamentals is
important.

The day to day and even
minute to minute market
fluctuations are driven by
technical traders and by the
greed or fear of individual
investors.

But, eventually a stock will end
with a price consistent with its
fundamentals.

A technical trader trading
volatile stocks with technical
analysis will do well to keep
this fact in mind.

Trading Volatile Stocks with Technical Analysis

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