Measuring Volatility on the Stock Market
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If you’ve been paying attention, you know that the stock market has been rather volatile. For those with a very long time frame, periods of volatility are not a great cause for concern. However, for others with shorter trading time frames, volatility makes a big difference when it comes time to enter and exit trades. Understanding stock market volatility and what it means is important. Noble Trading offers this overview of some important volatility indicators on the stock market:
- Stock Beta: Beta is the comparison of a stock volatility to market volatility. The greater the beta the higher the volatility. Beta value mainly favors long-term traders and investors (mainly CAPM investors) as it does not tell anything about short-term stock volatility.
- Bollinger bands: Bollinger bands and other standard deviation indicators mainly favor swing to intermediate term traders. They can also be used for a variety of purposes such as generating signals, finding supports and resistances, and finding trends.
- ATR indicator: Average True Range indicator measures only the volatility and is used by many traders to find entry points and stop-loss levels. ATR% and time series of ATR% can offer better results.
- Chaikin Oscillator: Chaikin accumulation distribution oscillator is an indicator which uses closing prices to measure market volatility. Though lesser known, it is an effective indicator to analyze money flow, confirm trends and predict trend changes.
- Moving averages: There are a number of indicators based on moving average, which respond differently to market volatility with reference to the smoothing factor they use. MA indicators are extensively used by all types of traders trading all kinds of instruments.
Indicators can be a way to get a feel of how sentiment is moving, and how you can discover trends in the stock market that allow you to take advantage of trends.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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