What Type Of Market Do Traders Prefer And Why?
A true trader is not necessarily drawn to any particular market trend. However, what traders find crucial is volatility. Provided there is ample volatility, a trader can thrive in both bullish and bearish markets. This gives an active trader an edge compared to HODLers, who, in essence, only realize gains in bullish market conditions. An important aspect to note is that some traders utilize leverage to amplify volatility.
Why Increased Volatility Creates More Trading Opportunities
If you are a trader or have at least dabbled in the trading world, you would know that volatility is the lifeblood of any successful trader. Without volatility, trades simply lie dormant. Even in a bear market, there are numerous opportunities to go long and vice versa. Markets don’t simply move in one direction, even when there is a clear, defined trend. Price action still moves up and down within the “channel” of any particular trend.
We are currently experiencing a significant rise in volatility in the Bitcoin market. This increase in volatility is closely tied to global developments. Recent events in Canada, Russia, and Ukraine can significantly move markets. This is especially true of the current and ongoing Russian invasion of Ukraine. On the breaking of the news that Russia had officially invaded Ukraine, BTC collapsed approximately 10%, leaving many anticipating an aftershock.
Bitcoin Bounces Back
In less than 24 hours, Bitcoin had bounced back to pre-invasion price levels, surprising many, including myself. One would expect a sell-off, perhaps even further losses, as the situation continued. This is not to say that the market will not drop again, or even fall below the recent dip. However, it is evident that market drops are over-exaggerated in the event of geopolitical tragedies. We saw a similar reaction in March of 2020. Learn more about free ways to earn more Bitcoin here!
Investors and traders jump ship, further compounded by cascading liquidations, as margin calls prove to be too little, too late. These events make for amazing trading opportunities. I have mentioned before that I personally picked up ETH at approximately $100 at the very bottom of the March 2020 dump. This has proved to be a tremendously powerful move, but felt much like a weakness at the moment it was actually executed.
Is This A Trading Opportunity In Disguise?
HODLers are probably becoming rather impatient and aggravated, as every time BTC breaks $40K, it is either rejected at $45K or even $42K. HODLers are currently in a position of stagnation. That said, those willing to buy the bottoms of recent dips are likely gaining ground. Traders, however, are most likely doing well, provided they have taken advantage of the 6% to 10% dips, as they have been coming through like a beautiful set on a morning beach break.
This raises the question of whether trading might actually be the best approach in the current market. Opportunity often comes dressed in overalls but also in the form of pain and catastrophe. When all is well, the opportunities have already been seized. This obviously applies to those familiar with trading, as inexperienced traders are likely to lose rather than benefit.
Is A Small Allocation To Trading Worth Considering?
It might be a good idea to allocate a small percentage of one’s portfolio to trading to capitalize on current volatility. Obviously, buying at extreme lows would be the way to go. For leverage traders, shorting at key resistance levels after a bullish move is rejected would definitely be the way to go. However, with such an increase in volatility comes unpredictability. This is quite a big one! When events take place on such a large scale, anything can realistically happen!
This makes it a good fit for those who already have some trading experience, rather than simply for anyone wanting to benefit from the opportunities at hand. There are some great trading opportunities playing out, but they are definitely not for the inexperienced, especially when leveraging. Those who have never traded futures are generally very ill-prepared for what they encounter on their maiden voyage!
An Important Warning For First-Time Leverage Traders
Trading futures or other leveraged products, such as CFDs, can help increase trading profitability. However, newcomers should ideally begin with 2X leverage until they get the feel of the mechanics involved and how to avoid liquidation events. A first-time leveraged crypto trader using 20X leverage is likely to lose valuable trading capital. A better solution is perhaps a practice account.
Practice accounts are credited with virtual currency, allowing newcomers to learn the ropes without risking their own capital. Another important aspect is to allocate only a small percentage of your trading capital to any one trade initially. This gives you additional capital to add to a position that is favorable for an additional allocation. This is a good risk management discipline to develop.
What Are The Best Crypto Exchanges For Trading Today?
When it comes to spot trading, exchanges such as Binance and KuCoin are excellent options. Binance, widely considered the leading crypto exchange, was established in 2017. For leveraged trading, Bybit offers an extensive range of products and assets. Traders looking to trade smaller-cap altcoins, especially micro-caps, can use Gate, which lists 4,600 assets. These are industry leaders with healthy trading volumes.
Conclusion
Fortunately, with calamity comes opportunity. Many of us would rather not see what is unfolding in our world taking place. However, that is not something that any of us can control. The only thing we can do is to find a way to extract something of value from these otherwise tragic events. The world is currently in a chapter of disaster and instability. This backdrop will continue to drive volatility in financial and global markets and ultimately create significant opportunities for those willing to take educated, informed risks.
This, as usual, is not investment advice. In times like these, it is even more imperative to conduct extensive research before entering any investment or trade. Calamity can produce tremendous opportunities; it can also give birth to even more calamity. So, ensure you are aware of the potential risks and pitfalls. Thanks for taking the time to join me, see you in the next one!