High Risk Stocks: Trading Becomes Easier With Machine Learning

motek 1This high risk stocks article was written by Chloe Peng, Analyst at I Know First. Master of Science of Finance candidate at Brandeis University.


  • Aggressive stocks are higher-risk investments that can potentially produce higher returns and bigger losses.
  • Investors who are more risk tolerant prefer these stocks than conservative ones.
  • I know first’s Aggressive Stock Forecast package helps you identify good opportunities.

What Are Aggressive Stocks?

Aggressive stocks are high-risk, high-reward stocks. They can potentially produce higher returns than conservative stocks, but also has equal potential for bigger losses. Examples of aggressive stocks would include junior mining stocks, smaller technology stocks, and penny stocks. Or if you look at quantified indicators for example standard deviation and beta. Stocks with betas of 1.5 or higher tend to be at least 50% more volatile than the S&P 500. That volatility can generate huge swings in share price in the near term with high risks.

volatile stocks
(Source: The Motley Fools)

The high risk associated with these stocks makes them unsuitable for many investors. However, it can be attractive for more risk tolerant investors. In the next section, I will discuss with you the definition and influence factors of risk tolerance definition and different types of risk tolerance.

Risk Tolerance And Its Influence On Investment Preference

You may be asked to fulfill a questionnaire when you use a banking App for the first time. Or you will hear the word risk tolerance from your investment advisor. Risk tolerance is an important part of investing. It is the degree of variability in investment returns that an investor is willing to withstand in their financial planning. It’s crucial to find out your real risk tolerance level. If you take too much risk than you can bear, you may panic and sell at wrong time.

Risk tolerance is often affected by the person’s age, investment goals, income and knowledge on the financial market. Generally, people who are younger and have a longer time horizon are often willing to take on greater risk. And people’s age affects their investment goals and eventually affects their risk tolerance. A person who just retired may want to invest his money cautiously. He prefers slow and steady growth of his wealth in the long-run to help him enjoy his old age in peace.

Your earning ability also affects how you take risks and what asset class you can invest in. If you have higher income, you accept risks better and you will be given the rights to invest in riskier assets. For example, if you have high income or you are a high net worth individual, you qualify the requirements of private equity investing. Thus, you can invest in the higher risk and higher possible reward asset class. However, if you are young and are not qualified to invest in riskier assets, stocks, bonds mutual funds are more suitable for you.

risk scale
Source: PAi.com

The above picture presents the scale of risk tolerance. And obviously, moderately aggressive and aggressive investors are more suitable for aggressive stocks.

How To Trade On Volatile Stocks

Now, since you confirmed that you have the stomach and ability to invest in aggressive stocks, the next thing you think about is how to trade them. In this section, I will remind you of several things before you get into trading.

High Risk Stocks
(Source: Pinterest)
  1. First of all, aggressive stocks are volatile and risky. You should be fully prepared for the risks.
  2. You need to set a stop loss in order to protect your capital and make a profit in the long-run.
  3. You can start with a small account and grow. Trade the money you can afford to lose.
  4. Most volatile stocks are deemed to be held in a short period. You can use day trading or swing trading strategies. However, if you are very confident with some stocks, of course you can hold them for a long time.
  5. Do not overtrade. Profits are made through waiting instead of trading. Trade rationally and protect your portfolio.
  6. Pick the stocks and improve your portfolio.

Investors often use trend following strategy to gain from these stocks. The main goal is to buy high and sell higher by trading on the right side of the trend. When buying stocks, the longer-term uptrend should be up. When shorting stocks, the longer-term uptrend must be down.


Take Overstock.com Inc (NASDAQ: OSTK) as an example to demonstrate the strategy. To determine whether a stock qualifies for our watchlist, we will first check if the stock is in an established uptrend on the stock chart.

In the chart below, the upward stock price makes OSTK qualified for this strategy. However, the stock is now trading far above the existing trend line, so we will not chase the stock. In fact, OSTK has more than tripled in the past 3 months. A better entry point to buy the stock is to wait until it drops and approaches the trend line or wait until a new trend line is established. I Know First has been watching this stock and after we sent out the forecast package on July 14, OSTK increased by 123.03% in 1 month.

High Risk Stocks-ostk
(Source: Yahoo Finance)

Another aggressive stock that stands out in the last month is Tupperware Brands Corporation TUP, which about doubled in 1 month. TUP operates as a direct-to-consumer marketer of various products across a range of brands and categories worldwide. It engages in the manufacture and sale of preparation, storage and serving solutions for kitchen and home, as well as a line of cookware, knives, microwave products, microfiber textiles, water-filtration related items.

TUP stock is very volatile because the company has significant debt load, which is why the latest quarterly report carries a “going concern” notice. Tupperware said it has over $501 million in senior notes that are due in June 2021, and management determined that “raises substantial doubt about the Company’s ability to continue as a going concern.”

However, the earning surprise for Q2 2020 boosted the stock price up. By cutting costs, tackling debt, and getting rid of certain business elements, Tupperware was able to boost its profit in Q2. A lot. Tupperware reported $63.8 million in quarterly net income, which translates to $1.30 in earnings per share (EPS). Analysts expected a net EPS loss. See TUP’s stock chart below.

High Risk Stocks-tup
(Source: Yahoo Finance)

High Risk Stocks Pick

After you keep in mind the risks and possible rewards of aggressive stocks, you can start trading. But how do you pick the right sticks?

High Risk Stocks-algorithm

I Know First offers aggressive stock package, as one of I Know First’s equity research solutions. Our predictive stock market algorithm is based on Artificial Intelligence and Machine Learning. This makes the algorithm capable of creating, modifying and deleting relationships between financial assets. With the relationships and latest market data, it provides daily forecast on stocks. Besides, we have developed and trained the system for more than 15 years. The algorithm learns from its previous forecasts and continuously adjusts the relationships thus it can quickly adapt to changing market situations. The model is 100% empirical and free from human bias, which keeps the forecasts objective.

The package includes top 10 stocks for long position and top 10 stocks for short position. We present the forecast in a heat map which shows signals and predictabilities of each stock. The picture below demonstrates the forecast we sent out on July 7, 2020. The algorithm correctly forecasted 8 out of 10 stocks movement. Tupperware Brands Corporation (TUP) performed the best with a return of 155.2% and the package increased 52.79% in 1 month on average. 

In the forecast we sent out on March 4, 2020, the AI presented top 10 stocks to short. After 7 days, 10 out of 10 stocks price fall accordingly, giving investors positive returns. FET had the greatest monumental price change of 62.14%. REI and CHK also gave investors satisfying returns of 47.11% and 35.18% respectively during the period. Besides, the package generated 27.69% average return in 7 days.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock market forecast, gold prediction, Forex forecast, oil prices forecast, and, in particular, top tech stocks. Today, we are producing daily forecasts for over 10,500 assets. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

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Please note-for trading decisions use the most recent forecast.