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How Traders Can Take Advantage of Volatile Markets

Stock markets these days are rather rocky. We have seen some major falls and surges in the past few months. With that in mind, it is important to remember – those who win in trade are the ones who can take advantage of the volatility around these swings, share market investment tips, and turn a profit out of them. As you will learn below, when markets are volatile, it means price swings are wider. This often results in trending markets. This can present you with an opportunity to make money on stocks that move up and down within a larger trend.

Define your objectives and bolster your defences

People often refer to trading as an art or a sport, not a science. While this is partially true, there are some basic share market tips and guidelines that will help you become successful while trading volatile markets. While many traders are saddened by volatile markets, others see such market conditions as the opportunity to make money.

To maximise your chances of making a profit from the volatility you need to have a set of objectives that are achievable and be willing to put in place strategies that help protect your account.

Focus on trending stocks

There’s a reason why people tend to focus on trending stocks. They are easier to predict and have a higher chance of success. Most traders have a tendency to focus on stocks with low volatility. Low-volatility stocks are generally more predictable and tend to be less risky in the short run. They are also boring and you can get better returns by looking elsewhere. Buying share in volatile stocks, on the other hand, comes with a greater risk of losing your investment.

Anyone can make a profit trading stocks in a bear market, but fickle investors want to make money in a bull market. Whether you’re bullish or bearish on the economy and the markets, there are ways you can compete with other investors and make your share of gains this way. One way is to trade volatile stocks and multibaggers stock that have greater growth potential and which can be bought when their share prices are down. Traders who get involved in this managed hedging business are likely to have an edge over their competitors.

Watch for breakouts from consolidations

A market consolidation is the period when a price trends sideways as opposed to trending upwards or downwards. Watching for breakouts from market consolidations is important because it allows traders to take advantage of volatility and make money on bigger swings being created.

Conventional wisdom says that in a volatile market, all stocks are bound to follow suit, and equally so. While this may currently be true, the longer-term historical data, however, indicates that it is in fact not the case. In reality, there will always be stocks that break out from their consolidations while others don’t. Therefore, instead of simply watching a number of stocks, it would make sense to focus on those that are showing clear signs of breaking out from a consolidation.



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