Rate of change could be more important than the change..!
Rate of change is used to mathematically describe the percentage change in value over a defined period of time, and it represents the momentum of a variable. The calculation for ROC is simple in that it takes the current value of a stock or index and divides it by the value from an earlier period. Subtract one and multiply the resulting number by 100 to give it a percentage representation.(Investopedia)
What Is Volatility?
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index. (Investopedia)
What Is Dispersion?
Dispersion is a statistical term that describes the size of the distribution of values expected for a particular variable and can be measured by several different statistics, such as range, variance, and standard deviation. In finance and investing, dispersion usually refers to the range of possible returns on an investment. It can also be used to measure the risk inherent in a particular security or investment portfolio.
(Investopedia)
My observation:
One day rate of change dispersion almost doubled in the past 5 months, which means market risk has been doubled at least!
Conclusion:
In a market with higher risk and higher volatility there is a greater chance of getting stoped out (losing money)even if your analysis is correct!
Solution:
Trade less frequently and sit on cash(30-70%)
The most important point in trading is: Managing the Risk correctly..!
Best,
Dr. Moshkelgosha M.D
DISCLAIMER
I’m not a certified financial planner/advisor, a certified financial analyst, an economist, a CPA, an accountant, or a lawyer. I’m not a finance professional through formal education. The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.
What Is Volatility?
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index. (Investopedia)
What Is Dispersion?
Dispersion is a statistical term that describes the size of the distribution of values expected for a particular variable and can be measured by several different statistics, such as range, variance, and standard deviation. In finance and investing, dispersion usually refers to the range of possible returns on an investment. It can also be used to measure the risk inherent in a particular security or investment portfolio.
(Investopedia)
My observation:
One day rate of change dispersion almost doubled in the past 5 months, which means market risk has been doubled at least!
Conclusion:
In a market with higher risk and higher volatility there is a greater chance of getting stoped out (losing money)even if your analysis is correct!
Solution:
Trade less frequently and sit on cash(30-70%)
The most important point in trading is: Managing the Risk correctly..!
Best,
Dr. Moshkelgosha M.D
DISCLAIMER
I’m not a certified financial planner/advisor, a certified financial analyst, an economist, a CPA, an accountant, or a lawyer. I’m not a finance professional through formal education. The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.