Using Volatility To Your Advantage When Trading Tech Stocks

At first, trading can seem to be an incredibly cumbersome process that is quite confusing. However, as you get into it, you’ll learn that the process is actually incredibly simple; given that you keep a few key concepts in mind. One of those concepts is that it’s important to remember that you can use volatility to your advantage. Today, we’ll talk about what volatility is, how to use it to your advantage when trading tech stocks, and what my favorite tech stocks to trade are with regard to this type of strategy.

What Is Market Volatility

When you get involved in the trading world, you’re going to hear the word volatility quite a bit. While the word tends to scare long term investors, for short term traders, it really is a dream come true.  For short term traders, volatility is equal to opportunity. So, what is it?

Volatility can be defined as a term used to describe how drastic movements surrounding the value of a stock are. If the stock is consistently climbing big before falling hard, it’s a stock with incredibly high volatility. However, if a stock trades relatively flat or on a highly predictable upward or downward path, the stock has relatively low volatility.

How To Use This To Your Advantage

As mentioned above, for short term traders, volatility can be defined as an opportunity in the making. At the end of the day, when you’re making short term trades, your goal is to find a stock that’s moving quickly, buy that stock low, and sell it high. If a stock is consistently dipping to incredible lows before climbing to incredible highs, as traders, we have a bit of a spread that can lead to a great profit for us.

The first step in this process is going to be finding highly volatile stocks. There are several tools that you can use to do so. Social networks designed for traders, like StockTwits, often provide tools that allow you to see which stocks are being talked about the most. These are likely the stocks with high volatility. There are also tons of free volatility calculators out there that you can use to find your own hidden gems.

Next, you’re going to need to figure out a good entry and exit point. This way, when you’re done, you’re making a profit. This is when it’s a good idea to use indicators like the MACD and Stochastic indicators. There’s a great article at The Binary Advisor that explains how to combine these indicators, creating a strategy that I’ve used and been incredibly profitable with.

Great Tech Stocks For These Types Of Trades

Here’s a list of my favorite tech stocks to take advantage of volatility through…

Apple – Lately, there have been quite a few debates with regard to whether or not Apple will be able to continue growing or it will plateau. This is leading to incredible volatility and great opportunities popping up often.
AT&T – AT&T has been an incredibly interesting stock to follow as of late as well. The company recently announced an acquisition, but now, there are reports that the acquisition could be blocked. This is creating plenty of volatility to take advantage of.
Twitter – Finally, Twitter is a big topic. While the company essentially put itself up for auction, there are no buyers. Now, they’re looking at layoffs, a possible CEO resignation, and more blues. This is getting interesting as well!