Stock prices fluctuate – that’s well known. How much they fluctuate is expressed in terms of volatility. Another word for it is fluctuation, which says very exactly what it is about.
If you want to invest in a company and consider buying shares in shares, then a look at the volatility – or “Vola” for short – is often appropriate .
Decision using the volatility model
With this model you can decide how many shares can be bought. The calculation is based on the fluctuation range of the share. You have to be clear about how much money you are willing to risk per share. Furthermore, it is important to set a stop-loss level, which regulates from when the securities should be sold again, if the price falls.
The next step is to choose an individual period and determine the highest and lowest price of the stock. For stock investments, the period should be rather larger, often at least one month is recommended. But there are also 10 days, as well as 60 days or more. If these two values have been determined, their difference or distance is calculated. ...CONTINUE READING