How to manage risk and make money in this volatile market
June 14, 2021
6 minutes to read
Opinions expressed by Contractor the contributors are theirs.
Trading is profitable when done strategically. However, this can be particularly risky with the constantly changing nature of the financial market. While volatility can make trading difficult, it could also be the perfect entry point for many new income opportunities.
But why does the market frequently notice this recurring change? The simple answer is that market volatility is inevitable because its nature allows for constant upward and downward fluctuation in market prices over a short period of time. It’s mostly in the financial sector.
The current trend of market volatility has made many investors question the potential for earning income even with top-notch investment strategies. How? ‘Or’ What?
Volatile markets are significantly tied to high volume trading, which can cause delays in trading and the execution of trading requests at market prices different from those quoted at the time of the order. Likewise, trading platforms can experience significant chaos as there can be noticeable difficulties in executing trades and even accessing accounts.
For beginner and novice traders, this sharp rise and fall in the short-term financial market may cause them to withdraw from investments while waiting on the sidelines until the market is safe again. On the flip side, some brokers just want to make more money and ignore the signs of an inbound change and end up losing more than they need to.
Related: Starting Your Trading Career? Three important requirements for your success.
Most of the time traders don’t know how to control and balance their emotions like fear and greed which can lead to big losses. Likewise, they may lose the ability to seize the opportunity to take advantage of the tremendous price action in the market. Experienced traders, on the other hand, know that volatility can surface at any time, interrupting smooth trading.
While knowing when to know your marketing strategies is important to preserve capital and profits, it is also necessary to maintain a long-term horizon and overlook short-term fluctuations. One way to do this is to develop day-to-day strategies to stay afloat in today’s volatile market. Here’s how you can profit more even with high market volatility.
Understand that trading is risky
Trading is a business filled with uncertainty and risk, whether it is stocks, crypto, or the market. When you can make more money by trading stocks at a profitable market price today, there may be deviations in the same market value on another day and this can affect the quotes you receive during trades. Essentially, to stay afloat even in a volatile market, brokers need to stay on top of their game, taking care of their sanity and understanding how the stock market works is the first step to staying vibrant in trading. Unlike stocks, crypto trading has a lot of volatility. Either it is a stable coin i.e. USDT or a hybrid coin (i.e. IMCoin) the whole market is very volatile.
Manage business risk
When volatility increases, taking decisive action to manage risk is of the utmost importance. Each trade has its own risk, and knowing the likely risks will help you visualize, compare and analyze trades at their possible entries and exits, which will also help you estimate your returns.
Know your order types
When trading, it’s best to know how much risk you’re willing to take. This is because trading is not just about winning a trade you might have made. Rather, it is the amount of risk you take without incurring a loss. While there are different ways of knowing your order type and setting movement levels, you will want to know your risk-taking ability before trading.
Related: Can You Manage Investment Risk?
If you prefer to trade using moving percentages to calculate your risk and set your levels, consider using long-term averages. This will reduce the risk of losses when market prices rise, especially when volatility is high. On the other hand, the limit order is a strategic tool that will keep you afloat in the volatile market while reducing losses by buying the stock at a price slightly above the market price. Essentially, you are increasing the market value, which will increase your income.
Likewise, it is important to take profit limit orders. Experienced and successful traders know the risk of investing and, if done strategically, can come out with exceptional prices when the market is trending.
Use tested strategies to trade
It is necessary to have a strong, well-defined and proven working strategy to operate successfully in all market conditions. With this working strategy, you don’t erratically jump into the volatile market without observing the market trend. Additionally, traders should have a set of rules that guide vital risk events that generate posts, which are highly volatile.
Take control of your emotions
Obviously, the volatile market is one that requires patience, knowledge and control. Indeed, this can easily make investors without trading know-how to abandon their investments. For a successful day-to-day transaction, never let confirmation bias influence your thinking. Taking control of your emotions will provide you with the discipline you need to act decisively rather than on impulse or to chase performance due to recent winning trades.
Review your process and stay informed
Regardless of the level of expertise traders may attain, an ever-changing factor should be education. The exit from financial markets continues to evolve due to global progress, and there is room for improvement. But, to improve yourself, you must learn to invest your time in learning about new market reforms for easy day-to-day trading. It is also vital to review past strategies and processes.
While many factors, such as unexpected profits and downsizing in the central bank, can cause market price fluctuations leading to a volatile market, staying afloat in a volatile market will only depend on ability. psychological trader.
Each trader reacts differently to price fluctuations during trading. But to transform a volatile market into a profitable one, you not only need to know and manage the risks, but also to have your trading strategies defined, to control your emotions during a transaction by being patient and disciplined, to review the work processes and to invest. time to discover new reform markets.