Traders and investors everywhere are spooked by volatility whenever it rears its head. We hear about it every time stocks take a tumble, even if that doesn't happen so much these days. So the Investopedia definition I'll show you is probably the last thing they're thinking of.
"Volatility: A statistical measure of the dispersion of returns for a given security or market index. Commonly, [emphasis mine] the higher the volatility, the riskier the security."
Now, that doesn't sound so scary, does it?
Volatility is nothing more than a statistical tool that shows how much a stock goes up or down. Yet many see volatility as a bad thing, because they equate it to risk. And risk is bad for us, right?
Well, sometimes risk is bad. But to the smart investor, volatility is a difference maker. Because without it, you might as well just buy a CD. More importantly, you have zero chance of beating the market. And where's the fun in that?
That's right: Without volatility, you don't beat the market.
That's why one of my 10 Trading Commandments is "Volatility is a trader's best friend!"
Now, let me prove it to you...
Tags:trading strategies
To get full access to all Money Morning content, click here
About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.
Disclaimer:© 2018 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.
The post Don't Be Afraid of Volatility; It's an Extremely Profitable Ace in the Hole appeared first on Money Morning - We Make Investing Profitable.