Volatility is the dispersion of returns for a given security or market index. It is quantified by short-term traders as the average difference between a stocks daily high and daily low, divided by the stock price.
Trading the most volatile stocks is an efficient way to trade, because theoretically these stocks offer the most profit potential.
Not without their own dangers, many traders seek out these stocks but face two primary questions: How to find the most volatile stocks, and how to trade them using technical indicators? (See "The Four Most Commonly-Used Indicators for Trend Traders.")
Trading the most volatile stocks is an efficient way to trade, because theoretically these stocks offer the most profit potential.
Not without their own dangers, many traders seek out these stocks but face two primary questions: How to find the most volatile stocks, and how to trade them using technical indicators? (See "The Four Most Commonly-Used Indicators for Trend Traders.")
How to Find the Most Volatile Stocks
Finding the most volatile stocks isn't complex, and doesn't require constant research or stock screening. Instead, run a stock screen for stocks that are consistently volatile. Volume is also essential when trading volatile stocks, for entering and exiting with ease.
Stock Fetcher is an example of a filter you can use to track very volatile stocks.
Applying the above filters, Stock Fetcher will pick stocks with average moves greater than 5% per day (between the open and close) over the last 100 days. Furthermore, if you are only interested in stocks, adding a filter like "exchange is not Amex" helps avoid leveraged ETFs appearing in the search results.
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