What’s your first reaction when market prices suddenly go tumbling down or climb up? Do you start to worry or do you calmly think it through and act based on your trading strategy? In any case, as a trader, you’ve probably experienced market volatility in a number of situations. Online trading comes with the uncertainty of price fluctuations and this is what keeps traders on the edge of their seats.

If you’re wondering whether there are any ways to help you feel more confident and reassured in times of high volatility, keep reading below!

 

What is Volatility?

In a short period of time, volatility measures the tendency of a market or security to rise or fall sharply. Typically, it is defined as the standard deviation of an investment's return over a specified time period. Investing in different types of assets will have different volatility depending on how much and how often their prices or returns move over time. Price fluctuations and heavy trading are common characteristics of volatile markets. This happens when there is an imbalance in trade orders in one direction.

The volatility of the market usually rises when investors are fearful or uncertain. Economic downturns, geopolitical events or natural disasters can cause this kind of downturn. In 2008-09, for instance, the credit crisis contributed to higher market volatility. In addition, the market volatility spiked in 2022 when Russia invaded Ukraine.

 

What Can You Do?

1.   Risk Management

Traders should always be aware of the risk entailed in online trading. Just as huge profits may arise, unexpected losses are also part of CFD trading. However, this does not mean that you should just sit back and remain inactive when things go sideways. Risk management is all about carefully considering your trading positions, your entries and exit points, and the funds you are willing to risk. Especially in volatile markets, risk management can prove to be one of the most fundamental strategies for every trader. In this way, even if any unexpected price changes occur, you will have already prepared your exit strategy and your next move.

2.   Remember your Ultimate Trading Plan

When you first created a trading account, you probably had a specific goal in mind that you wanted to achieve in a certain period of time. This is the ultimate trading plan that guides you throughout your trading journey and keeps you disciplined when challenges arise. As your trading positions could be affected by a variety of factors, such as global economic events, it’s important to think back to your trading plan. This can help you look at the situation more clearly and then help you decide your next move more effectively. What’s also essential to remember is that your trading plan will keep you motivated as every day you will want to be one step closer to making your trading goals a reality.

3.   Stay Ahead of the Markets

How can you stay one step ahead of the ever-changing financial markets? By practising and educating yourself on a daily basis. If you truly want to become the trader you aspire to be, you need to put all your efforts into boosting your trading skills and knowledge. In this way, you will be better prepared to handle any challenge that comes your way. It is also essential that traders stay on top of every economic event that could impact their trading positions, as fundamental analysis is vital when it comes to analyzing and understanding price movements.

 

Are you ready to face the markets? Log in to your XPro Markets account and discover all the tools and resources you need to conquer the volatile markets and discover some of the most trending CFDs out there! 

 

Risk Warning: Contracts for Difference (‘CFDs’) are complex financial products, with speculative character, the trading of which involves significant risks of loss of capital.