Beta coefficient

Small online stock trading article about this value

Beta coefficient is tool which can be used for selecting momentum stock picks for momentum day trading strategies .

This value is simply the measurement of the volatility of a specific instrument. The higher the number is, the larger the moves you can expect from the instrument (like stocks).

If the Beta value for a stock is 1, it means that the stock will make similar moves as the markets do.

If it is 2 or 3, then you can expect the stock is making large intra-day moves. Opposite stocks with low value are good vehicles for investors who do not prefer big swings in stocks price and portfolio values.

A very good tool for selecting stock with high or low volatility value is a free Yahoo stock screener.

Here’s an example of a free stock screener result looking for U.S. stocks with a volatility higher than 3 and a price higher then $10 USD. It found 73 results.

This beta if often used by short term stock trader. If you prefer daytrading as your type of stock trading, then you would like to trade stocks with higher then normal volatility.

These stocks are moving in bigger swings during intraday trading time. They offer much more daytrading opportunities that can be turned into profitable trade then stock with low volatility.

But bigger volatility means also higher risk. It is important to apply money management rules accordingly. Volatility should be used for money management and position trade management for daytrading strategies but also for swing or position trading strategies.

Return from beta coefficient back to stock market trading tips