Today, we've made yet another educational video for you. In this video, we'll talk about a crucial topic: volatility. You've probably heard or read somewhere that whoever understands market volatility makes a lot of money. As a result, we'll discuss volatility, how to earn as a trader despite it, and how to profit more at a higher risk. So, let us get started, shall we? Here we go.
Many traders in the market, we believe, are aware of the concept of volatility but are unsure how to use it. When we talk about volatility in the context of beginner traders, we're talking about how volatile the market is and how much significant movement you may expect. During a market change, the volatility of a particular stock or index may be apparent. It means if the volatility of Nifty is high, the chances of breaking down the highs and lows of Nifty are equally high, as are the chances of a strong rally.
Volatility has significant rewards due to the large move. If the move is in your favour—100 to 200, 200 to 300—you won't even realize when your option price moves, and you'll make a significant profit. However, if you have a terrible day or make a stupid choice, and the movement is in the opposite direction, you'll lose a lot of money. It is something you must remember.
You can learn about volatility in a variety of ways. There is, however, a straightforward approach for learning how to calculate volatility without the use of indicators. Take a look at the stock's price first, then the ATR. ATR stands for Average True Value. Let us say if you have a 100 rupee stock and its OI is increasing at 110, 120, 130, and so on, and the reverse is at 90, 70, or even 80, it indicates that the stock's volatility is increasing. The OI will not fluctuate significantly if the volatility of a stock is modest, as it is in the 100 rupee stocks 101, 102, 103, and 110. It shows that volatility is low and that these equities aren't yet ready to take off. Our main goal as traders is to make money and make more money. Nothing, especially for option buyers or future traders, is more important than volatility to make a big profit. When there is more volatility in the options market, the premium you pay on the option price climbs drastically since the risk of the options also rises.
If the Bank Nifty is trading at 35000 and the market volatility is high, the strike price will be 35500 or perhaps 36000, which is highly expensive on the call side due to the high volatility expectation. Take a look at the data from February 1st for an example. It was budget day, and strike prices of 1500, 2000, 2500, 3000, and higher were becoming unaffordable. As a result, none of the buyers can make a purchase. You can learn more about it in the video below.
Another alternative is to use an indicator as a method of determining volatility. In the Indian Stock market, the VIX indicator is used for this in particular, which is committed to volatility. So you can take advantage of it and keep in mind that the VIX indicator has a range. If the VIX is less than 15 or between 10 and 15, it suggests VIX will not fall below that level. A big rally could occur in either direction, and you should be well prepared. As VIX approaches its inverse, such as 40 or 35, the chances of advancing beyond it diminish. From there, the market will either be flat or sideways, due to which your best bet will be to buy. As a result of the premium decay, you will lose money.
Traders, the main goal of today's video is to show you how to profit from volatility. If VIX is low, as we said before, you should set a VIX level, understand the market mood, and determine whether the market is in a bullish or bearish trend. If the market is in a downturn, it is in pause mode, which suggests that another huge bearish trend could start from here, or the market could reverse rapidly. When the market shifts to any side, a trader might profit handsomely by buying a call or a put.
How can you avoid this? It's time to purchase if the VIX is 35 or 40, and if you're buying as a swing trader for 2-days, 4-days, or 5-days, theta day will be pretty quick from there. If the expiration date approaches, the VIX will continue to fall, inventiveness will plummet, and the market will move less, resulting in significant losses.
So the simple message you can take from here is that no one can stop you from booking profit if you understand volatility, particularly how to read VIX, read OI, and shift volatility along with the market trend, as we told in the video. You can make a lot of money with volatility. It's important to remember that you should never trade without a stop loss. You will be left with nothing if you work a specific risk in volatility without a stop loss. Your account will get nil, and you will be unable to execute the trade owing to a lack of cash, which you will regret.
So, we hope you have a good understanding of volatility. Still, if you want to learn more about volatility, leave a question in the comments section. Whatever query you have, we will do our best to answer them.
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National Stock Exchange (around 2000 companies listed) and Bombay Stock Exchange (around 5000 companies listed).
1 to the high of Rs.
Also, note the broker will charge you brokerage charges and certain mandatory government taxes.
Though this question has been asked by those who wish to start investing in the stock market, it might have crossed others’ mind too who are sitting on the fence, and who have small regular savings.
It is suggested that you buy minimum shares of 15 to 20 different companies representing different sectors/industries so that you build up a diversified portfolio.
By diversifying your portfolio you are actually minimizing (spreading) the risk that you can take, as share market is volatile.
Stock Market Onward to Buy Enhance Revenue Invest With Payoff On Budget
This year may be termed Indian stock market on the budget day as a year of a lot of events than ever.
currently, we've got another spherical of pleasure sourced from the future budget in a very few days and, of course, the quarterly numbers.
So, we are going to go back a number of the information and tricks that may are available handy as so much because of the investments and commercialism care.
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