Tag: volatility

  • How to Find a Stock Worth Trading?

    How to Find a Stock Worth Trading?

    How to Find a Stock Worth Trading?
    To find a stock worth buying several parameters should be estimated and examined. Here is what really matters.

    By Guy Avtalyon

    If you want to know how to find a stock worth trading, think about the stock’s valuation, strategy, plans for diversification, and your appetite for risk.

    The first consideration on how to find a stock worth trading should be the company’s earnings. Profitability is important because when you buy a stock, you’re buying a part of the company. Calculate its P/E ratio, just divide the share price by a company’s annual net income. 

    For example, if a stock trades at $30 and has an annual net income of $3 the P/E ratio is 10. The general rule of thumb: if the stock’s P/E ratio is higher than the broader market P/E, it is considered expensive and vice versa.

    But the P/E ratio isn’t a perfect measure. For example, a small, fast-growing company may have an extremely high P/E ratio but earnings are poor while the stock price can be high. You have to gauge if there is any potential for strong growth and if there is, such stock may not seem expensive.

    So, look for trends in a company’s earnings growth. Find do the earnings regularly increase. If you have a confirmation for that, get it as a good indication that the company is operating well. There is no need for an incredible increase, even a small increase can be an indicator of a positive outlook, but only if it is consistent over a long time.

    Volatility matters

    The volatility in the stock market is natural. The companies are losing value in the markets from time to time but also could increase the value. Every trade you make in the stock market is actually kind of betting on the market direction, on the volatility, or both.

    For stocks trading, volatility is good for the long term because you have to make a profit. And you can do that only if the stock price fluctuates. If you really want to find a stock worth trading, seek the high volatile stocks.

    If the stock has a high volatility the value could be spread over a large span of values. This means the price of the stock could fluctuate drastically in a short time, which is ideal for fast-moving trading. Contrary, if the volatility is low, the stock’s price will stay almost steady which offers fewer chances for a quick profit.

    Beta as a measure of volatility

    Use beta as a measure to unveil how volatile the particular stock is.

    The beta can predict the total volatility of a stock’s returns against the returns of a related benchmark, for example, the S&P 500. If you find that beta value is, let’s say 1,3 that means the stock price moved about 130% for each 100% in the related benchmark index. Hence, if the beta value is 0.6 that would mean that stock has moved just 60% for each 100%  in the related benchmark.

    Trade volume matters

    Volume is the total number of shares traded in a market during a particular period. Each transaction adds to the total volume. For example, if during one trading day there are 100 transactions, the trade volume for that day would be 100. How to find a stock worth trading when using trade volume? Volume works as a great indicator that adds weight to the market move. For example, if some sudden spike appears, the strength of that movement depends on the volume during the time observed. 

    When picking a stock worth trading, pay attention to how great is volume. The greater volume, the more important the move is.

    How to find a stock worth trading?

    So finding a stock worth trading is a matter of combing for stock with large volume, a current spike in volume, and a beta higher than 1.0. The stock that lacks these elements will be very difficult to trade successfully.

    The way you use these factors will affect your possible profit. The trading style depends on your trading strategies. You have to find a stock whose price changes to profit from that fluctuation. It is impossible to profit from trading stocks if there are no changes in price. Also, the same comes if the volume is low. The low volume shows a lack of buyers and sellers. How to profit from that?

    Stock Price

    You may consider the stock price. Some companies could distribute additional shares and increase the number of available shares but lower the price per share in the market. Some will never do that. It is considered better for investors because such stock could rise more in price and worth more after some time. Anyway, the stock price will show you how many shares of a particular stock you can buy for the capital you have. Pay attention to stock price historical performances. That will give you a clue how the stock is possible to play in the future and is your chosen stock worth buying.

    But active traders will prefer, for example, stocks in play but they’ll need to carefully watch the news because such stocks are not the same every day. 

    How to find a stock in play worth trading?

    These stocks are suitable for day traders because they are changing dramatically sometimes during the trading day. Also, they carry enough volatility to generate favorable risk and reward trading ratios.
    Day traders will normally look for stocks that have big price changes during the one trading day. These stocks are not a good choice for investors with a long time investment horizon.
    Active traders expect more action. They exit the trade much before the end of the trading day, sometimes a few minutes after they enter the trade. These trending stocks can be found on many broker’s trading platforms. There you’ll find stock worth trading.

    Bottom line

    Trading, even if it is considered as a risky strategy, can be highly profitable. Of course, if you know how to find stock worth trading. As we mentioned above, pay attention to trading volume, volatility, liquidity, and price. All of these criteria together will help you to find the stock worth trading.  

  • Day Trading Stocks – Most Profitable Type Of Trading

    Day Trading Stocks – Most Profitable Type Of Trading

    For day trading stocks you need volume, volatility, and a trend or range tendency. When using a stock screener, enter your rules into the relevant fields to narrow the surplus of stocks down to a few.

    Maybe it is too difficult to explicitly say that one type of trading stocks is more profitable than the others but Day trading stocks is the choice of active traders because of its profitability. Why did we say it is difficult to point to the special one? Because it depends on what kind of trader someone is and, maybe much more, on which strategy the trader chooses to use. Also, it isn’t the same which market you trade and what assets you are trading. 

    The individual traders can make a few trades per day since it isn’t hard to enter and exit several trades daily. Of course, big investors would prefer long-term opportunities. 

    One is sure, getting into day trading stocks is a decision that no one should make in a hurry. You should take time to examine all difficulties, to learn them since day trading stocks requires very careful planning. Only in that way, you’ll be able to earn your life-time capital in just a few hours. Yes, it is possible because day trading stock is one of the most profitable types of trading.

    Before we jump into the day trading stocks we have to explain what day trading is.

    What is Day trading stocks? 

    Day trading stocks means the trader is opening and closing the position during one trading day. When a trader opens a trade at 10 PM and closes it before 2 PM we are talking about day trading. You can find the traders who trade day only, some will perform it depending on the situation and opportunities, but also, so many traders never implement day trading stocks.

    How does a day trader pick the stock?

    Of course, a day trader is very careful and never just picks a stock no matter which one. Day traders always estimate the reasons to trade a particular stock. And as the reasons are different, traders have different criteria and strategies.

    Since there are thousands of stocks in the market to choose from, the main question is how to do that? What is the best criterion, measure, method? It differs too. And if we try to figure it out, we can get confused. Look, some traders can find a new stock every single day. They are seeking stocks that are breaking out of patterns. Some are looking for the most volatile stock or the stocks that breakout of support or resistance levels. Also, some traders have the favorite stock or two and trade them every day for months or years. This isn’t without a good reason behind. If you know the particular stock very well, you’ll need less research on it. Since you already have the chosen one, you don’t need to search further for new stocks and breakouts or volatility. 

    How to find a stock for day trading?

    If you want to become a day trader, you have to pay attention to several things.

    Volume

    For a day trader, a stock volume is important to enter and exit trades. To explain this more. When the volume of the stock is high it is much easier to enter and exit the position and to do without slippage or with very little. Why is it important to avoid slippage or to lessen it? Slippage happens almost all times but generally during periods of high volatility when traders use the market orders. 

    It happens when a trader gets a different price than expected, no matter if such a trader is on an entry or exit from a trade. Slippage occurs when the market order or your stop-loss point shifts somewhere between the time of your entry and the time of the execution. This is especially noticeable during periods of higher volatility when orders are bigger than the usual amount of shares on the bid or offer.

    While choices vary, but many day traders will trade stocks with a daily volume of several million, some have over 90 million. That is a big number and it is hard to manage that. So day traders usually narrow the number of stocks down by using a stock screener. If they still have too many stocks to observe, the traders commonly reduce it to stocks with a volume of 3 of 4 million on a daily average.

    Volatility

    Volatility is important too because day traders need stocks with strong change during the day. The stocks have different volatility. Some will move 0.5% daily but others will move 5% or more per day. Picking the stock may depend on many factors, for example, reflexes, a trading style, your temper, etc. For the majority of traders, the stocks that shift 0.5% to 2% daily are the best choice since they can handle that volatility. Volatility over 5% daily is hard to handle. Only the most experienced traders trade these stocks.

    Trend and range

    These two components are important in day trading stocks. Traders differ by what they are trading, so we have trend traders, range traders and some that use both excellently. As you know, the trend is the direction of stock’s price, while the range is the difference between low and high prices over a particular trading time. The stock price is moving all the time. It can go down or up showing a downtrend or uptrend. A stock screener is very helpful here and will separate stocks with trend or range depending on your setups for the strategy you chose.

    How to learn day trading stocks?

    There are many ideas and methods to maximize profits from day trading. Nevertheless, managing the risks connected to day trading is most important.

    First, trade only the amount you can afford to lose. You must have aside some amount of money for day trading. Don’t rent money for day trading because it’s possible to lose it. Start with a small amount and keep strong control over losses until you get some knowledge and experience. Don’t think you can quit your day job immediately. Day trading is seductive, we know that. But you need to test your strategy when the markets get rocky, for example, during the recession. If you are profitable, you can easily shift to day trading.

    When to buy?

    Day traders try to make money by using small price movements in assets. They have to leverage vast amounts of money to do so. They are focused on liquidity. That allows them to enter and exit a stock at a favorable price. Further, they keep an eye on volatility, higher volatility leads to greater profits or losses. Trading volume is another thing that they are considering. High volume means there are a lot of people interested in the particular stock. When the volume is increasing that is a sign that the price will drop or go up. After you choose a stock you want to trade you have to learn how to recognize the entry point. Some tools can help you. For example, some news services, but it has to be a real-time service because the stock prices can be influenced by news.

    Quotes are important too. Electronic communication networks, for example, display the best open bid and ask quotes from various market players and can automatically pair and execute orders. 

    Intraday candlestick charts are useful but provide a rough analysis of price action. 

    Your entry point has to be defined very accurately, you have to know the exact point when you are going to enter the position. For example “during the downtrend” isn’t precisely defined. You have to define more specifically and test it too and find if there is a chance for that to be generated each day or more often. 

    Also, the direction has to be tested. You would like the price to go in your expected direction. After you check and test everything you may have a potential entry for your strategy. 

    After finding an entry point you’ll need to judge how to exit, or sell, your trades.

    When to sell?

    There are many ways to exit a winning position. For example, trailing stop and profit target. The profit target is the most popular. The other well-known price target strategies are scalping, fading, daily pivots, momentum. The best time to exit is when the interest in the stock is decreasing. The volume will show that. Your profit target should provide you more profit on winning trade than you would have a loss in a bad trade. For example, if your stop-loss is 2% away from your entry price, your take profit level should be more than 2% away. You have to know your exit before you even enter the trade. The exit level has to be precise.

    Bottom line

    Day trading means to take advantage of small price changes. It can be a profitable game if you play it carefully. Hence it can be a risky game for new and inexperienced traders who don’t have a strong trading strategy. This type of trading is connected to the high volume of trades. So you have to respect some general principles if you want to become a day trader.

    You may have profitable trades by following the patterns. More about it learn from the “Two Fold Formula” book, we recommend. But we also recommend to test it by using our preferred trading platform firstly.

    You might find these interesting too:

     >>> Is Day Trading Like Gambling?

    >>> Swing Trading and Day Trading – The Difference

    >>> The pattern day trader rule

    >>> Day Trading the Best Methods – Day Trading for Beginners

    >>> Day trading stocks – How to find best trading platform

    >>> What is the best day trading strategy?

    >>> Money Required to Start the Day Trading

     

     

  • Bitcoin experienced a distinct decline in its volatility!

    Bitcoin experienced a distinct decline in its volatility!

    1 min read

    Crypto-Endorsements Gone Sour | A Celebrity Special

    Bitcoin experienced a distinct decline in its volatility during a period in which the volume of the largest cryptocurrency achieved a new yearly low. The volume of Bitcoin dropped from $4.2 billion to $3.2 billion on October 7, by more than 23 percent. Since then, the volume of BTC has recovered substantially, back to $4.2 billion, but it still remains substantially lower than previous weeks. The overall decline in trading activity in the cryptocurrency exchange market due to the uncertainty in the short-term price trend of Bitcoin is said Bitcoin experienced a decline in volatility.

    Mike McGlone, a commodity strategist, stated that as the cryptocurrency market matures, the rate of Bitcoin volatility will continue to rapidly decline. He explained that an emerging asset class often sees a large discrepancy in its daily price movements and volatility in volume until it finds strong infrastructure to support and solidify its market.

    “This is a maturing market, so volatility should continue to decline. When you have a new market, it will be highly volatile until it establishes itself. There are more participants, more derivatives, more ways of trading, hedging, and arbitraging.”

    Since August 9, the price of Bitcoin has remained relatively stable in the range between $6,400 and $6,800. In the middle of September, BTC surpassed the $7,000 mark, but the asset has shown no signs of solid momentum, mostly due to the lack of volume in the cryptocurrency exchange market. After that, on October 6, the cryptocurrency exchange market recorded its lowest daily volume in over 12 months. That occasion made traders be concerned regarding the short-term trend of the market.

    Stability of bitcoin

    The stability of BTC allowed investors in the market to initiate an accumulation phase in a low price range, enabling more investors to enter the market and acquire BTC. That’s why is so important for Bitcoin to experience a decline in volatility.

    The eminent venture capital investor Garry Tan, said, a low price range helps investors enter a new market or an asset class with significantly less risk: 

    “The crypto winter generally makes it safer for super-long-term oriented Yale-model institutions to enter at a price that isn’t dangerous. You know what is scary? Investing and then immediately seeing an 80% drop. That is hard to recover from.”

    It is surprising that the cryptocurrency market is not reacting to many of the positive developments that have emerged in the sector over the past few months.

    The Reaction of the market 

    Bitcoin experienced a distinct decline in its volatility!

    It is possible, that the market will begin to respond to most of the progress that has been made in the sector over the last three months. Bitcoin has not shown a high level of stability in a long period of time. Considering that Bitcoin has recovered beyond its previous high point, it is more likely for it to move to the upside.

    Many analysts and traders in the cryptocurrency market stated that extended periods of stability and consolidation often lead to a strong upside movement.

    Generally speaking, when you’re analyzing charts, higher highs and higher lows are the indicators of a positive move up. Lower highs are not pointed where you can expect a rally. However, we are speaking about Bitcoin and it is so unpredictable.

    Investor Mike Novogratz has emphasized $6,800 as a major resistance level for Bitcoin throughout the past month, and if it comfortably surpasses that level, then it will be able to eye resistance levels in span $7,000 and $8,000.

    If Bitcoin breaks out of the $6,800 mark relatively quickly, Novogratz said it is possible for Bitcoin to demonstrate a 30 percent increase in price by the end of the year.

    The question is if this the right time to start accumulating Bitcoin?

    On the end of August, when the price of BTC was around $6,600, we all can read expert’s statements that the bear market is not over yet but it is a viable period for new investors in the space to start accumulating Bitcoin.

    Following that opinion, it is highly unlikely for Bitcoin to decline far below its current price range and we may conclude that it is an appropriate time to start accumulating BTC.

    Risk Disclosure (read carefully!)