Friday, 26 June 2015

Who Benefits From High Volatility?


Who benefits from high volatility is itself a highly volatile question. Whether traders make good profit from it, whether brokerage firms get killer brokerages or the exchanges makes huge volumes? 
             If we believe in regulator data, NCDEX surged the 20% mark from a 15% average turnover share among all the exchanges. This is primarily because monsoon forecast has been wayward and IMD prediction has so far been way off the mark prompting the agri commodities to behave volatile benefitting the exchange. But did the traders benefit out of this volatility? 
The answer is no. One of the reason why NCDEX has witnessed rise in turnover is the down side movement in Non-Agri commodities which normally had good volume on MCX particularly in Gold and Silver. Traders always look for the opportunity to buy these commodities at lower levels in the hope of price recovery. Per say, volatility in Agri commodities is not beneficial to small traders and to exchange to certain extent. The volatility in any commodity is always useful to the intraday traders or smart traders who do not have emotional part attached to their open positions in the market. During the volatile market, quick decision making ability is what makes a trader profitable, according to Milan Shah, Analyst with Commodity Online. Mostly the big trading groups and the traders who have handsome amount of margin money can take benefit of the volatile movement and can sustain in the market. Small traders will lose their money and will not trade until new margins are arranged to take new positions. In that case, Exchanges may lose trust of the genuine traders and some volumes as well. One of the reason why NCDEX has witnessed rise in turnover is the down side movement in Non-Agri commodities which is mostly having good volume on MCX particularly in Gold and Silver in which there is a huge part of volume in over all exchange turn over. As traders always look for the opportunity to buy these commodities at lower levels in the hope of price recovery. There is no volatility issue in Non-Agri commodities like Crude Oil and Natural Gas as they have witnessed good volatility on intraday as well as weekly basis in recent times. But comparing the time frame for return in Agri commodities vs Non-Agri commodities, Agri commodities have always given fast return in minimum time frame in volatile movement which attracts the traders who have good amount of money to take positions. But it is always problematic for small traders to trade in Agri commodities during volatile movement as Risk-Reward ratio is high and to keep their position open for next day they need extra margin while also having risk of Gap up or Gap down opening during volatile market.

About

Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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