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What Are the Most Volatile Stocks?

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Nov. 30 2020, Published 2:42 p.m. ET

The first thing that you need to remember about volatility is that the greater a stock's volatility, the more risky the stock will be. Most volatile stocks fluctuate in value more than other investments. What are the most volatile stocks?

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Volatility measures the risk of a stock. It denotes the pricing behavior of the stock and helps to estimate the fluctuations that could happen in a short amount of time. If the price of a stock fluctuates significantly in the short term, it's said to be highly volatile. In contrast, if the price of a stock fluctuates slowly in the long term, it's said to have low volatility.

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What are volatile stocks?

Volatility is a statistical term that determines the range of returns for a given stock or market index. The dispersion is calculated through a standard deviation or variance between returns. A widely cited volatility indicator is the beta of a stock. It indicates the stock's correlation to its benchmark index.

A stock with a beta of 1.2 has historically moved 120 percent for every 100 percent of the benchmark index move. As a result, a stock with a low beta will deviate from the index less than a stock with a high beta. A higher volatility means that the stock price range is expected to be wider than the range for a less volatile stock.

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In simple terms, the volatility of a stock is the amount that a stock is expected to shift away from the price at which it was being traded at any given time. A stock that fluctuates $5 per day with a $100 stock price is more volatile than a stock that fluctuates $5 per day with a $200 stock price because the percentage move is higher with the first.

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How to find the most volatile stocks

It isn't difficult to identify the most volatile stocks. Finding volatile stocks doesn't require stock screening or constant research. You can perform a stock screen for shares that are consistently volatile. The volume is also important for entering and exiting with ease when trading volatile stocks.

Visit StockFetcher or another screener of your choice to look out for stocks that consistently display high volatility and heavy trading volumes. If you are on StockFetcher, it can pick stocks' average moves higher than 5 percent each day over the last 100 days. It also filters shares priced in the range of $10 – $100 and with an average daily volume of more than 4 million in the last 30 days. If you are only interested in stocks, you can add a filter to avoid leveraged ETFs appearing in the search results.

Should you invest in volatile stocks?

If you are investing in the most volatile stocks, you will have a greater opportunity to earn bigger profits. A highly volatile stock can offer infinite opportunities to trade the swing. Day traders likely won't choose shares that only fluctuate between a few pennies because certain volatility is required to trade profitably. Most volatile stocks are impacted significantly by any market fluctuation.

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