Volatility - Avant-Garde Investing


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Rapid and unpredictable (or less predictable) price action in a financial asset. Volatile stocks see much faster up-and-down movements, which typically come with relatively high volume. Assets become volatile upon technical breakouts (from periods of consolidation) or news events that are relevant (macro or micro). Many traders like volatility on the basis that it allows for greater profit opportunities in a shorter period of time than you see through range-trading. More conservative traders try to avoid volatility. Momentum trading presents risks as some buyers lose discipline and jump in at high points, only to see a position quickly reverse. Applying technical analysis, including support-and-resistance levels, is especially key when trading volatile assets.