Volatility in the stock market may trigger radical decisions even for the most seasoned investors. But it brings profitable opportunities as well. Stay with your perspective even when volatility strikes the market. Let us look at, Demat account, volatility, its impacts and strategies that will help you to make investments in the volatile market.
Volatile Market
A volatile market shows wide price fluctuations. A market going up and down is normal but if the movement is at a fast pace in a short time period, it’s a volatile market. Volatility denotes the tendency of securities to rise or fall rapidly within a short time frame. Volatility is inevitable in the stock market. So, better to learn to tackle it.
Impact of volatile market
During times of volatility, you will notice heavy trading in one direction only i.e. all buys and no-sells or vice versa, and resultant an imbalance of trade in the stock.
As you know, volatility in the stock market is inevitable so companies also have strategies to handle it. Investors should know that a volatile market makes companies change investing procedures with them. They implement procedures that can decrease their exposure to extraordinary market risk. Maybe that some market-maker firms discontinue automatic order executions temporarily and manage orders manually so that they can limit trading orders. Ask your brokers, how to place an order successfully during times of volatility.
Some of the impacts that you should know:
- Delays
A high volume of trading during volatile times may cause delays in trade executions.
- Price Difference
You may find a significant difference between the execution price and the quoted market price.
- Digital turmoil
You may have to face chaos in place of your trade orders or even you have difficulty face your problems because of the limitations of a system’s capacity. In this case, you need to place your order with your broker over the phone.
- Quote discrepancies
There may be discrepancies between the size of a quote in real-time and what is happening in the market at present. You will find that the price at which a lot of shares available at a certain price has changed within nanoseconds.
For online trading, you need a demat account. You can open a demat account and trading account online. Demat account opening charges vary from broker to broker.
For quick execution of your trading order, you need fast internet-enabled devices along with an advanced trading platform.
How To Profit From Volatility
- Long-term horizon
During the volatile market, you need to maintain a long-term horizon for investment. A volatile market may fulfil your dream of getting partial ownership of a reputed company because the price of stocks goes down. If you have researched a company well, and find it profitable in the long term, you can buy its stock at a low price.
- Right Order Type in a Volatile Market
It is very important to choose the right order type during volatility. There are two types of order mainly, the market order and the limit order.
Market Order: A market order will always be executed, even in volatile markets, but at what price! It may surprise you. You may get a stock at a different price from a quoted price.
Limit Order: A limit order is placed with a broker to buy/sell stocks at a predetermined price. It may be you buy shares at a better price than a specified price. But a limit order may not always be executed during the volatile market.
An investor needs to place limit orders. You may find it slightly more costly than market orders but go for it because the share price at which you will purchase or sell is predetermined. Bajaj Financial Securities Limited Trading account will help you in trading smoothly as it offers a robust digital trading platform along with low-cost brokerage solutions.
During times of volatility, choosing to stay invested is a great option but only when investors are aware of the potential risks and know how to handle volatility. Stay confident with your strategy. Ask firms how market makers handle order executions during a volatile market.