Investing in cheap stocks is fascinating. Everybody wants to find shares in the stock markets that will soar up in a day, one month or a year, bringing unbelievable returns. However, many of these cheap stocks are highly volatile, and sometimes, for a good reason. Below is a guide of how to find cheap stocks and safe in a volatile market.
New Investors in a Volatile Market
For new investors finding cheap stocks to buy in a volatile market, it can be disconcerting. Most of the well-respected names come with a price tag. Even if these stocks have excellent growth potential and a long history of stable returns, they may not be logical for first-time investors.
However, cheap stocks for less than £10 offer a huge upside potential as well as learning opportunities. When evaluating cheap stocks, it’s essential to look for more than the price tag. Other things to consider include, what type of company is it? What is the company’s potential to grow and maximize profit in the coming years? What is the high Wall Street saying?
Why Is volatility Important?
Volatility in the price of cheap stocks can result in upward or downward wild swings with a small-cap. The increased possibility of a sizeable profit also carries a bigger risk of losing. However, some investors have made super-profits in volatile stocks.
There are several strategies that these people use. For example, one might buy high numbers of low-priced stocks and wait until there is a small rise in value, and this can result in significant overall gains.
But, keep in mind that when you are buying shares, the requested price target implies when purchasing the shares. If the price increases before sales processes, you can end up receiving fewer shares. That means, the more volatile the stocks, the more reward or risk can get expected.
So, volatility is essential in that it gives the investors an array of options that allows the buyer to tailor a strategy that suits his investment needs. Investors can diversify on more low-risk volatile stocks with assured low return rates to round off their range of investments.
How to Trade in Volatile Stocks?
Several strategies can apply when you want to trade cheap stocks in a volatile market. First, you should determine the tolerable risk level for the stocks you want to have.
Then, decide on the best investment strategy that will best fit your situation. For instance, day traders can make plenty of transactions per hour selling and buying shares of volatile stocks that are most active. If you want to control the investing process, you can use a market order to set limits on when you want to buy.
There are growing trends where investors are using Robo-investors or automatic investing programs to make decisions. It involves the use of computer programs that use algorithms to formulate buying decisions.
Signing up for these brokerage accounts is free, and with low fees, you can be able to make investment decisions on your own. But it is advisable to get advice from a broker, financial analyst, portfolio manager, or investment advisor.
When buying shares, you can set limit orders at a specified strong buy price. Your stop limit is a tool that can get used to purchasing when the shares price drops to the specified threshold. This tool can help you manage negative swings when dealing with volatile stocks.
Additionally, stop limits can be used to bet against a company with the hope that the price will drop. To minimize losses, stop limits help to cover either side of price fluctuations, but at a controlled return rate.
How to Find Cheap Volatile Stocks?
There are various safe ways you can discover cheap volatile stocks. You can use websites such as MarketBeat for useful and up-to-date investor information. MarketBeat offers a stock screener, which is a tool used by individual subscribers to help them sort stocks by use of specific criteria year over year.
The tool allows investors to identify shares that have reached the desired volatility level. But the specified criteria highly depend on your preferred investment strategy. You can as well examine stock trades that display fast changes in prices over a certain period. Also, you can look for the largest percentage gainers by checking for large volumes of low-price trading.
You can also invest in cheap volatile stocks through global stock exchanges. Can get achieved by calculating the beta, or stock risks using mathematical analysis. You need to consider the company’s past information and compare it with similar benchmarks in the market or the industry.
Investors can also get a list of the volatile shares trade on websites that offer advice on stock investment. The price position and volatility movements get compared to determine market changes and the comparative risk of stocks. In general, the most volatile stocks tend to have the highest beta. Companies with a beta value of more than one have higher volatility than those with less than one.
Depending on the evaluation strategy used, a company’s given value can differ. Some investors look at the financial documents released every season on stock price while others look at per-share earnings and buy ratings to analyze for investment opportunities.
In any given earning season, changes in a company’s profit can significantly influence the price value of shares as investors buy in response.
The disadvantage of using one strategy to find out value is that the method may miss on red flags, which other methods might pick. When you are searching for the most active volatile stocks, consider analyzing all available information through various tools like those available on MarketBeat and others.
Should I Invest in Trading Penny Stocks?
Penny cheap stocks are and volatile stocks to buy for or less than £5. You can buy them in big volumes but be careful before deciding to invest long term. The idea is to allow greater returns by allowing higher volumes, but volatile stocks carry more risk.
Penny cheap stocks are an excellent option for those who can risk in investments. The day traders use intraday volatility to make high volumes of transactions all day long. Some investors who use well-thought strategies and careful investing practices make good profits on penny stocks.
To find double digits in a volatile bear market, you need first to consider your overall investing strategy, the length of time you can invest, and the available investing funds.
An option like betting against 30 upside stocks to watch can make you benefit from the decrease in price. With the above guide, you now know how to find cheap stocks and safe in a volatile market.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.