What is volatility prognosis?
The volatility forecast concerns the practice of investors who are trying to assess the amount of price movement by specific security over time. The securities that are most volatile are those that move in a wide range of prices and often do it in a short period of time. When predicting volatility, there are natural problems, because securities that are volatile are also unpredictable, thus creating difficult. One way to predict volatility is the method of standard deviation that measures the difference between daily security prices over a certain period of time and its average price in the same period. The investor, who wants to join in stocks for a long time, probably does not want to see how he rises and decreases erratically all the time he takes place. The levels and levels of volatility tend to move to each other. For these reasons, the volatilitying forecasting is a skill that most investors should try to cultivate. Volatile stocks may have prices that are variedAzi up and down almost randomly. Investors often try to predict the timing of these fast movements. Volatility prognosis is particularly necessary for those investors who practice daily trading, which often requires the purchase and sale of securities within hours.
One method used by investors to practice volatility forecasts is a standard deviation method. This requires taking over the average of security price in a given period of time. Once this is achieved, the daily price must be measured against this average during the same period. The difference between the daily price and the average price is a daily deviation. Averaging these deviations total provides an amount that can be used as a basis for comparison for volatility of different stocks.
Another simple way the beginning investor can do a little prognosis of volatility alone is to map prices movement every day for securitiesthat he wants to study. If the graph shows rows that rise up and down in a random way, the level of volatility for the security is significantly high. The more stable line on the graph means security that is relatively stable. Screening these graphs into the future can provide a decent estimate of future prices movements.