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VOLATILE MARKETS: HOW TO DEAL WITH THE RISK OF LOSSES VOLATILE MARKETS: HOW TO DEAL WITH THE RISK OF LOSSES
Market volatility is no different for many investors unless it is a source of strong concern, as it can destroy its investments, but also... VOLATILE MARKETS: HOW TO DEAL WITH THE RISK OF LOSSES

Market volatility is no different for many investors unless it is a source of strong concern, as it can destroy its investments, but also lead to serious repercussions on the entire capital. By their very nature, markets fluctuate in the short term and anticipating its trend is not easy. Investing in a time of strong market volatility is not advisable for beginners, while experienced traders are looking forward to it. Here are some tips for those who want to exploit these markets.

If I ask to each of you an adjective to define the market at this time probably the answer would be common to many: volatile.

What we are witnessing in the last few years is precisely the market volatility that does not even pay when the most rosy of situations appear to be present.

Market volatility hides the great enemy of all traders but it also has a way to exist in an optimal environment to make profits.

In a nutshell with a volatile market, the opportunities offered to the trader are many (albeit not lasting) and they have to be captured as soon as possible, although these opportunities have an high risk.

The danger is lurking especially for beginners whose invested capital can be pulverized in a few days, if not worse in a few hours.

Is it therefore possible to make profits in a volatile market without risking only huge losses?

The answer is yes, but just following a few tricks.

To understand how to ‘fight’ against market volatility, we need to understand that market is volatile by its nature because it oscillates in the short term and foresees its progress is extremely difficult.

The first advice to follow is ‘no panic’. There is no worst thing than getting panic and not thinking coldly.

So do not just coming out of those markets, clearing your positions. This move might make you feel safe from the beaten prices, but that sense of tranquility might turn out to be short-lived once the rebound came. And such tranquility will certainly turn into stress if you decide to come back into the market as you will not know how to or when.

On the contrary, taking advantage of the wave of sales triggered by other traders to take positions could make sense if better investment opportunities did not occur after months or years.

Another advice is to ignore volatility. Yes, that’s right.

A market is volatile when it is at the mercy of indicators and macroeconomic events and therefore of day traders’ actions. All this results in short-term fluctuations that are therefore to be ignored in favor of a longer time horizon.

Investing in a firm with a solid budget can be a solution as its stocks cannot undergo short-term fluctuations (of course if you think that company can continue to have good performances even in the long term).

Having faith in your strategy is the ultimate advice. Being aware of investing in a volatile market means also being aware of the risks that run and the only thing that can save you is to have a solid strategy.

Deciding to stay in the market and to trade in high volatility periods it is important to understand how much you are going to lose and how much such losses can affect your portfolio.

Having a solid knowledge and high expertise as being confident in your strategy is the fundamental principle of trading in volatile markets. If you possess these characteristics you can risk it, if you do not have them pray in a blow of luck.

 

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