If you’ve spent any time following or learning about the stock market, you’ve likely heard the general volatility of the stock market mentioned. Especially during these uncertain times, it is not unusual for the price of various stocks to rise and fall rapidly.
That being said, volatility in the stock market is not unusual, and in fact, is an essential part of the investing experience. It’s important to understand volatility so that you know when to invest and when to take your money out of the market.
What do you need to know about high volatility stocks and the stock market in general? Read on and we’ll walk you through the details.
Contents
What Is Stock Market Volatility
Prices are not consistent on the stock market. Volatility is a measure used by economists to see how much value in the overall market rises and falls. The fluctuation between high points and low points in value over a shorter period of time defines the current volatility of the market.
Frequently, when global external events create uncertainty, the market becomes more volatile. The COVID-19 pandemic certainly created uncertain economic conditions, as did the recent invasion of Ukraine.
When things are uncertain, people buy and sell more depending on their perception and predictions of the future. Quick changes in value across the market are the result.
When the market is volatile, it can create a more high-risk scenario, as the value of a stock can quickly fall. However, it can also offer opportunities to make a lot of money quite quickly.
High Volatility Stocks
While this measurement is often used to describe the state of the market as a whole, the same measurement could be used and applied to a particular, individual stock.
High volatility stocks are those where the price fluctuates rapidly. Bitcoin-based stocks, for example, are almost always extremely volatile given the uncertain nature of public perception around cryptocurrencies.
Standard deviation is often used as the statistical measurement to accurately measure the volatility of an individual stock. The more assets price ranges from its average price, the more volatile it is.
Again, investing in a volatile stock can be both a high-risk scenario and provide an opportunity for high reward. It all depends on how the market acts and when you buy and sell.
That being said, investing in individual stocks and hoping for them to fluctuate upwards might not always be the best investing strategy. You can read more about the best investing tips at rvwwealth.com.
Understanding Volatility of the Stock Market
If you’re looking to get a grasp on how the stock market works, you’ll want to read the above information closely. The volatility of the stock market can greatly impact the money you can make and lose when investing. Getting as familiar with this concept as possible will be key to your overall success.
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