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Trading in a volatile stock is difficult as the movement is often sharp and uncertain. Volatility, in simplest terms, defines the change in stock price over daily average change. This means that if a stock is swinging in the 5 per cent range and suddenly begins to trade over 5 per cent -- the average swing -- then it looks to have entered a volatile phase.
These uncertain moves are highly attractive, but trading in one is, in fact, risky. Volatility may trigger stop loss and show certain unexpected moves. Such a scenario disrupts trading morale, leaving traders anxious.
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