Will Kangaroo Again Destroy your wealth? What is volatility?

Do you know?? Kangaroo Market…..Yes, Current market!! |

How can Kangaroo destroys wealth, that’s the first question in your mind right? Don’t worry I will explain.

Global Markets had really crashed in Jan-Mar. Lots of people lost their whole capital due to huge volatility in the market. But wait what is volatility and How that above Kangaroo is affecting my wealth?

Volatility is nothing but the Standard Deviation from mean if its more we say volatility is High. The following example is inspired by Zerodha Varsity.

Let’s imagine you are a captain of the cricket team and only one wicket is remaining and you need 19 runs to win the match, you have 2 batsmen Raj and Shiv.


The past record is as follows:

                                                    

As we can see Shiv has more average than Raj but wait let us dig down more.


As we can clearly see we need 19 runs and the deviation from average in case of Shiv is huge so we can easily conclude that Raj’s consistency is greater than Shiv, so the probability of scoring 19 runs is greater in the case of Raj.

Volatility (Deviation from the mean) is huge in case of Shiv, same happened with Global Markets.

This is India Vix is a volatility index of India. It had made a new high. Now many stocks have started doing recovery like Reliance, Muthoot Finance, etc…

As we know Kangaroo Hops:


Due to wide move in markets during COVID Crisis many people lost their capital but now in this month investors are back in the form. A W shaped recovery we are seeing in many stocks. The time has arrived to wake up that Bull (Buyer) from you and fight that past Kangaroo Market (Volatile Market) but be ready with a small stop loss with some short term trades because Kangaroo can come again.


Edit 1 :


As we know bull attacks by thrusting its horns up in the upward direction, similarly buyers become aggressive and lift the price higher and bear attacks by lifting its paws and attack downwards similarly seller becomes aggressive and brings the price in a downward direction. In the kangaroo market the standard deviation from mean increases so there is a huge move either from the buying side or either from the selling side or from both sides.


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