How to Trade in Volatile Markets

2022-10-13

Wouldn’t it be such a beautiful, peaceful world if markets could remain stable and offer no surprises? Ah, to dream…
The reality of it is disappointing. Markets can be volatile , devastatingly so. Market volatility applies to a whole host of markets as well. The stock market, the forex market, and the crypto market are just some examples where volatility can reign supreme. Of course, there are ways to fight the volatility and ensure that you not only minimise your losses. But make decent money as well.
Let’s explore the different types of market volatilities, and understand some trading strategies to apply to each one.

What is market volatility?

In short, market volatility describes the unexpected sharp ups and downs that dictate the prices and valuations of certain items being traded on the market. It also refers to how frequently those ups and downs occur. The more frequently and aggressively those rises and falls happen, the more volatile a market is deemed to be.

Stock market volatility

An ideal scenario for the stock market would be steady, consistent, and expected upward movement. As we all know, that’s not the case. The stock market’s volatility is measured by a term called “standard deviation”. A high standard deviation is a solid indicator that there will be lots of movement, which will increase volatility. Market volatility can be calculated and forecast with the right amount of information.

Forex market volatility

Much like stock market volatility, forex market volatility operates the same way. However, this only applies to currency pairs within the market.

Why is the crypto market so volatile?

The true king of volatility, the crypto markets have the unenvious reputation of being considered the most volatile among the rest. Crypto markets operate on a whole other level, most notably because they’re decentralised. Liquidity is also a contributing factor, as they have quite a bit less liquidity than the traditional markets. The less liquid a market is, the more prone it is to volatility.

SP vs BTC

Trading in volatile markets

Just because a market is volatile doesn’t mean it has no potential for trading. However, there are certain guides to follow if you would like your investments to end in anything but turmoil.

Navigating Stock Market Volatility

Don’t panic. Your long-term strategies will not be as impacted as you think. We know the feeling of watching your assets slide down during a particularly volatile period. Most people who let go of their assets when the market gets shaky, end up missing out on a powerful rebound in the future.
Even blue-chip companies will have their stocks tumble. We find that to be a great opportunity to get their stocks at a cheaper rate than usual.

Navigating Crypto Market Volatility

Stick to the cryptocurrencies with the highest market cap. Yes, even those coins have extremely volatile moments, but they tend to bounce back. The same can’t be said about every coin.
Understand what is impacting these markets. Crypto markets, much like other markets, are influenced by outside news. In today’s world, even social media can play a heavy role in what dictates the rise and fall of some cryptocurrencies. Stay up to date with the latest movements by using reliable crypto news sources.

Volatility is unavoidable . It mimics society in its unpredictable and even volcanic ways. Having the proper tools to deal with moments of market volatility is imperative in being able to make money in unexpected times. As always, stay informed and research proper strategies that apply to your personal financial goals.
Happy (and most importantly, safe) trading!