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Foundation #2: Volatility Quotient

TradeStops Volatility Quotient
In the example above, it’s easy to see that Johnson & Johnson—with a VQ of 11%—is a less volatile stock than Tesla, Inc. at 30%.

Now that you are familiar with Trailing Stops, you may be wondering… Does a one-size-fits-all Trailing Stop work? The short answer is “No.”


Each stock has a different level of risk. Trailing Stops that take into account each stock’s specific risk profile are the ones that help you make the most money possible. This is why TradeSmith developed the Volatility Quotient (VQ). This critical number tells you, with a high degree of accuracy, exactly how much risk there is on any investment you own or are thinking of buying.

Having the right amount of volatility in your portfolio allows you to take advantage of big gainers and hedge them with more stable performers.

How TradeStops helps…

TradeStops establishes a Volatility Quotient (VQ%) for each position in your portfolio. This percentage represents the degree of volatility in the stock. 5-9% is pretty stable; 20-30% is pretty volatile.

TradeStops lets you allocate just enough volatility across your positions to take advantage of market movements without getting taken for a stomach-churning ride.