Investors certainly have hopes to get the maximum profit possible. However, investors also still need to know that their investments also carry risks. Many do not know that profits and risks come from the level of price volatility, not because the company made a net profit or net loss. Net profit and loss are only one of the supporting factors that can cause stock prices to go up and down. Other factors besides profit and loss, are government regulations, politics, up to the present health crisis also determines the profit and risk you will receive from investing in shares. Additionally, you may also go to http://www.nas100brokers.com/volatility75index.html if you want to trade in volatility 75 index.
Previously we must know that volatility is the annual standard deviation from historical data on stock price movements. Well, this is where the function or use of volatility appears as a risk management instrument that can be used to minimize losses, and maximize profits.
The existence of volatility in the stock market will certainly lead to greater risks and uncertainties faced by investors so that investors’ interest in investing becomes unstable. Volatile markets also make it difficult for companies to increase their capital. Therefore, investors must be able to estimate the movement of stock prices, so that investors can find out the right time to sell and buy shares.
By knowing the volatility of a stock index, we can find out the magnitude of the risk, because the risk is in the range of standard deviations that are the same as market volatility. So, as investors, we are ready to accept these risks and have calculated them carefully.
Market volatility is a standard annual deviation from historical data on stock price movements. Market volatility is like a double-edged sword for investors, because on the one hand volatility can be useful to calculate the risks that may arise due to market movements that are too drastic. While on the other hand, it can erode profits or capital gains obtained by investors. Therefore, it is important for investors to be able to properly manage market volatility.