The first question is, what is volatility? The word volatility means the change in magnitude, and regarding the share market, it is the rate of fluctuation or change in the value of the stock for a particular company. It does not indicate the move as positive or negative, but only the difference in the magnitude, no matter it is positive or negative.
And another question, what is about the volatility and how does it relate to the stock market? It would be harder to understand and analyse the stock when the change of stock is more volatile. The fluctuation done in this fashion becomes swing trading, and the swing trading is riskier. So, we should be cautious when swing trading is done. There can be a rise in 1000 dollars or decline of 1500 dollar and all happen in just a blink of an eye.
So, during the high volatility days or high volatility months, what kind of trading is better and preferred? During these high volatility periods, it is always better to go with the day trading, which means you buy the stock, hold for a few hours or just a few minutes and sell them off. Even if you keep the stock for a fraction of seconds, you are going to get a massive difference in the investment, and the change can either be positive or negative, and you should be very careful while taking this decision. Otherwise, it can be the disaster. On the other hand, if you are a long-time investor, hold the shares for the extended period, which could be some months or number of years.
Though these are the two ways, through which you can invest during the high volatile days or volatile months of the stock market. However, we all know that the risk is more to invest in these days. So, what can be the better alternatives to taking risks to invest in the highly volatile market? There are other ways of financing during the volatile market. You can go for the inverse ETF stocks. Some examples of the inverse ETF are like BGZ, TZA, SKF and FAZ, etc. The crazy volatile market can be exploited in these ways, and there are many more ways. And all it needs is the basic understanding of the position of the market and able to analyse the market in the right way, considering both the internal factors and external factors of the stock exchange. It is good to hold the stock until the curve or change of magnitude stops running. You got to follow the stocks and trades consistently in the stock market or over the online on your computer screen to know and get updated with the dynamically changing stock.
Inverse ETF is the one kind of stock trading, which works precisely opposite what the market does. We will explore more about the inverse ETF in the following discussions. Wait, lot’s more to come.