Sunday, October 23, 2011

Stock Selection (based upon their historical volatility)

Volatility -:It is a measure of how far the current price of a stock moves from its average past prices. Greater the movement, greater is the volatility.The high volatile stocks moves fast whereas low volatile stocks trades in a narrow range.

Historical Volatility Ratio (HVR)-: HVR represents the strength of current volatility as compare to long term volatility. The ratio represents the average volatility of a stock. If this ratio is above 1, the current volatility is high. Therefore large price movement is likely.

Now the key question is how to find a high volatile stocks?

First, we will have to find stocks with current high volatility. It may happen that the some stocks have un-usual high volatility. We can use HVR to eliminate those stocks.
We are comparing Volatility and HVR because volatility shows current position whereas HVR shows the average historical volatility.

We will first select top 20 high volatile stocks.
Then we will select 10 stocks out of those 20 stocks based upon their high HVR.

These stocks can use for intraday,  positional trade both.
For an intraday trade look for the patterns like ORB; Consolidation.
For positional trade, go with the trend.


rocky said...


can you tell us how you trade nifty on monday as well as today

amarjeet said...

respected sir

Rushabh Shastri said...

Wishing you a very happy diwali and gread days ahead,,,,talking market as it has tried well to come out of oversold zone of 4700 now its weak below 4900 only till then in a zigzag way open upto 6000. HIGH INTEREST RATE, HIGH INFLATION AND HIGH LIQUIDITY, HIGH PASSIMISSM will TAKE MARKET TO HIGH POSITION

Kuldeep.rk said...

Sir ji,

Wish you n your family a very Happy Diwali....

nalin said...

isnt jubilliant food is perfect eg.