What Is Market Volatility?

Simply put, Market Volatility is a term used to describe the markets or a single asset whose price is extremely erratic; sharply rising one moment then dramatically dropping the next. Oftentimes, it is hard to identify the trend line as the price of the asset changes so rapidly.

Day traders love volatile markets as they will buy when the price drops then wait a few minutes and sell when it dramatically swings higher. Thus, traders need to be very cautious during times of a volatile market as these dramatic price swings could swing Out-of-the-Money at the very last second of the Trading Period.

Selecting The Right Asset:

Selecting the right asset during a volatile market is essential to a successful trade. Carefully study the trend lines of all of the available assets and find the one that is not affected by the large price swings. The ideal asset is one where the chart shows the trend lines are long and steady and not switching up and down every few minutes.

Ride Out The Storm:

Often, traders refer to high volatility as a market storm. It is easy to see why people would feel this way as it is best for the armchair investor to leave this type of market movement to the professional traders.

Many professional investors have told me that when the market starts to swing wildly and the volatility level rises dramatically, trading at that point is being accomplished real good with proven strategies.