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Price movements are what drive the markets. However, when it comes to cryptocurrencies and various other markets, prices usually have constant fluctuations, which results in volatility. But while investors don’t like it, you can use the volatility of markets to your advantage if you are a trader.
To do this, you will need a few strategies to help you understand and effectively manage volatility. And to set you on the right path, below are the 5 most important ones based on our interview with trading and online casino expert, Benard Maumo from livecasinorank.com.
Stay Informed
Before you can take advantage of volatility, you will need to clearly understand almost every aspect of the market and the latest trends. As such, familiarize yourself with the fundamentals, underlying technologies, and factors that influence prices.
From there, you can dive into the market you are interested in and understand its basics, potential, and track records. You can then stay updated by reading news and market trends. Ensure you analyze things like price charts and trading volumes to identify patterns and potential opportunities. And through it all, make sure you learn from experts. This will help you position yourself to make better decisions in the volatile crypto market.
Dollar-Cost Averaging
One of the best ways to deal with the volatility of a market is to ignore it. That’s right, and you can do that with a strategy known as dollar-cost averaging. Here, you spread out an investment over regular intervals instead of buying in a lump sum.
For example, you can decide to invest $100 in a particular market after every two weeks. Without factoring in the price, you consistently invest the same amount. What will happen is that if the price is high, your $100 will buy fewer units of the crypto or shares. And if the price is low, your $100 will buy more units. Over time, you will have smoothed out the effects of market volatility. And since crypto is growing, you will also benefit from the long-term growth potential.
Diversify your Portfolio
Another way to reduce the negative effect of volatility is by diversification. This generally involves spreading your investment across different assets or asset classes. This strategy will help you offset losses from one market with the gains from another one. It will also expose you to different opportunities. For example, if you are dealing with cryptocurrencies, each of them has unique characteristics, use cases, and market dynamics. However, you should also ensure that you find a good balance between well-established ones such as Bitcoin and newer, high-potential projects.
Take Advantage of Short Term Trading
If you are an active trader, one other method that can come in handy is using short-term trading. As the name suggests, this means that you will buy your trades and then sell them within a short time, and this can even be minutes. To be able to pull this successfully, you will have to closely monitor the market and ensure you have real-time information. This way, you can then make good price predictions. Another crucial skill here is being able to study price charts and analyze indicators, which will help you identify some hidden patterns.
Refine your Technical Analysis Skills
As you may have realized so far, you will need good technical analysis skills to navigate a volatile trading market. As such, you will need to continually improve your ability to analyze price charts, identify trends, and interpret indicators.
To become good at this, you will need to clearly understand various chart patterns, such as support and resistance levels, trend lines, and chart formations. You should also explore technical indicators and oscillators, then use historical price data to backtest your trading strategies. There are lots of tools out there that can assist you with all this. However, note that even technical analysis is not fool-proof, so ensure you add various risk management techniques to your trading.
