It’s April and that means earnings season is in full swing, with reports coming out almost daily. These reports have varying impacts on the markets — some bolstering the markets up and others pulling them down.
One big report that investors are looking for is GDP. Many expect this number to go down, and this might lead to some short-lived, negative reactions in the market. But, a slowing GDP isn’t necessarily a bad thing. If GDP can slow to a more sustainable level, this could help keep inflation down to 2%, the Federal Reserve’s target.
Still, with Futures signaling mixed reactions each day and earnings reports moving the markets, dealing with the volatility can be stressful. Don’t let it be! TradeSmith is here to help you combat this.
In TradeStops, and our other TradeSmith products, we provide you the Volatility Quotient. This number represents the normal amount of volatility you can expect from a stock. So, for example, a blue-chip stock like Walmart can be expected to have less volatility than a risky stock like Tesla.
It was expected that Tesla wouldn’t quite meet analysts’ expectations with their earnings report. And, typically when stocks miss their mark, more volatility can be expected. This can cause some investors to quickly exit the trade, especially on bad news.
With TradeStops, however, we know what the normal volatility for Tesla would be. We could expect this stock to move 33.21% up or down and still be acting “normally.” Anything outside of this value would be cause to consider acting on the stock.
You’ll find the VQ% of stocks scattered throughout the program — on the Positions & Alerts page, the Position Card Page, the Stock Analyzer — anywhere you see your ticker symbols, you will typically see the VQ displayed somewhere close to the ticker.
Once again, by knowing this VQ number, you know the normal amount of volatility you can expect from your stock or fund. More conservative investments will typically have a lower VQ, like the ETFs above, and more speculative investments, such as pot stocks, tend to have higher VQs. These percentages can help take the fear out of the market when things are rapidly changing due to earnings reports.
Ideas by TradeSmith
If you’re looking for stocks to invest in, you could consider how much risk you’re willing to tolerate. Are you comfortable with a stock being highly volatile, or are you looking for something more conservative? This all comes down to your personal risk tolerance. And the VQ is once again your friend.
Within the Stock Finder, you can filter based on the VQ. This puts you in the driver’s seat to select how much volatility you are comfortable with.
By clicking that drop-down, you can select the VQ range that you’re most comfortable with. Remember, for stocks and funds, the VQ ranges are as follows:
- Less than 15%: Low Risk
- 15 — 30%: Medium Risk
- 30 — 50%: High Risk
- Above 50%: Sky High Risk
Once you set up the VQ range that you’re most comfortable with, you can select any other filters that appeal to you. Then, we do the hard work and find the stocks that meet your requirements. It’s a fantastic way to find great stock ideas even when the markets are at the whim of earnings reports.
“Quoted asset prices reflect all forms of publicly available information. Quoted asset prices change instantly to reflect new public information. Quoted asset prices change instantly to reflect inside information (not just public).” Sound a bit off? You’d be right! These efficient market hypotheses are wrong, and the proof is downright amusing.
The TradeSmith platforms — TradeStops, Ideas by TradeSmith, Crypto by TradeSmith, and Crypto Ideas by TradeSmith — are scheduled for maintenance on Sunday, April 28 from noon to 2 p.m. Eastern. During that time frame, subscribers will be unable to access their accounts. We apologize for any inconvenience.
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As the earnings season continues, don’t let market volatility bother you too much. With the TradeSmith suite of tools, you’ll know what amount of volatility to expect and when to pause and examine what’s going on with a stock we’re following.
Until next week,
TradeSmith Customer Success Team