Risks and Opportunities of Volatile Markets

June 29, 2022
Reading Time: 2 min
Risks and Opportunities of Volatile Markets - Blog 29 06

Does this situation sound familiar to you? The Cryptomarkets are moving up and down like crazy, volatility is reaching heights never heard of before and you are becoming more and more anxious if this whole “trading thing” really is something you should do? The media is only talking about “Cryptos are going to 0, the bubble has burst” and your friends and family are rolling their eyes when you talk about Bitcoin & co? Welcome to the 2022 Crypto bear market…. However, is a bear market really that bad if you are a swing trader or day trader? The answer is “no” because as a more short term trader you need volatility because volatility provides opportunities for Traders!

As a short term trader always remember: Volatility is your friend and future millionaires are forged in bear markets!

It doesn’t really matter if you are a Swing Trader (typically holds positions for 1 day to 2 weeks) or a day trader/scalper – nothing is as mentally tiring as staring at your trading asset of choice not doing anything and just moving sideways without any chances to enter into a trade. Especially beginner traders make stupid decisions in times of low volatility and just enter a position because they cannot stand just staring at their charts anymore without actually doing anything. Ironically these positions end up later on being the ones that lead to large losses or even empty accounts completely.

So whenever you hear so-called experts making statements like “You should stay out of the market because it is too volatile” please think twice because a higher volatility will automatically also make you more careful and sharpen your senses. If you see that, for example, Bitcoin/USD is moving up and down by 5 % today you will probably automatically choose a smaller position size. You also will be more likely to wait patiently for your indicators giving you good setups, because higher volatility automatically also results in more trading signals from indicators. If the volatility is just, for example, 0.20 % a lot of beginner traders end up trading too high position sizes because they try to overcompensate for the low volatility. Once you are in a large position and then suddenly volatility comes back into the markets things can very quickly get very uncomfortable for your account (and mental health)

As much high volatility setups do provide great chances to make good profits as risky they are, of course, also when you go too crazy on leverage. Do not utilize the leverage to its outer limits, try to stick to a maximum of 1:5 to 1:10 with stop losses and take profits that actually make sense. That way you will never risk destroying your whole account with just 1 trade, but can always recover after a series of unprofitable trades.

As a short term trader always remember: Volatility is your friend and future millionaires are forged in bear markets!

Risk Disclaimer
Investing in or trading gold or other metals can be risky and lead to a complete loss of capital. This guide should not be considered investment advice, and investing in gold CFDs is done at your own risk.
The information provided does not constitute, in any way, a solicitation or inducement to buy or sell cryptocurrencies, derivatives, foreign exchange products, CFDs, securities, and similar products. Comments and analysis reflect the views of different external and internal analysts at any given time and are subject to change at any time. Moreover, they can not constitute a commitment or guarantee on the part of PrimeXBT. The recipient acknowledges and agrees that by their very nature any investment in a financial instrument is of a random nature and therefore any such investment constitutes a risky investment for which the recipient is solely responsible. It is specified that the past performance of a financial product does not prejudge in any way their future performance. The foreign exchange market and derivatives such as CFDs (Contracts for Difference), Non-Deliverable Bitcoin Settled Products and Short-Term Bitcoin Settled Contracts involve a high degree of risk. They require a good level of financial knowledge and experience. PrimeXBT recommends the consultation of a financial professional who would have a perfect knowledge of the financial and patrimonial situation of the recipient of this message and would be able to verify that the financial products mentioned are adapted to the said situation and the financial objectives pursued.

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