Volatility is one of the predominant features of the cryptocurrency market and whether you have taken advantage of it frequently. That dip that made you buy and that massive rise made you sell are all part of cryptocurrency volatility. The volatility makes owning the top cryptocurrencies coins worth it, at least when you profit. However, most day traders avoid trading during volatile periods. Long-term investors, however, embrace volatility and don’t give too much thought to it.
Long-term traders and day traders’ attitude to volatility makes a perfect scenario for a case study writer to write on. It would be interesting to read as long-term traders seem to want volatility while day traders avoid it. As a trader, you shouldn’t be worried about volatility. It is an integral part of the market. With the correct information, you will understand the advantages of trading in a volatile period and how you can navigate it.
What is Volatile Period in Cryptocurrency Market?
A volatile period in cryptocurrency is a period of instability in cryptocurrency value.
Types of Volatility
- Low Volatility.
Low volatility arises when there are little or no fluctuations in a coin’s price or value over a highlighted period.
- Medium Volatility.
Medium volatility in the crypto market is a flux state between low volatility and high volatility.
- High Volatility
High volatility in the cryptocurrency market is when cryptocurrencies fluctuate over a significant time.
Advantages of Trading Cryptocurrencies During Volatile Period
Experts from assignment help have researched and stated that the advantages of trading in cryptocurrencies during a volatile period are as follows;
- Increased Liquidity
Like you, traders fret when the market is volatile. Some are eager to sell their cryptocurrency when they notice the market volatility. Thus, the prices of cryptocurrencies during a volatile period encourage traders to sell their coins as they fear that the volatile period could cut into their profit.
Unlike other traders, you are taming your fear of a volatile period, and because of the increased liquidity of the market, juicy deals await. You can get lucrative deals by buying coins cheap and holding on to them to sell later for increased profit when they rise. Also, you can dispose of your coins to traders who are willing to take the risk for a reasonable profit. The increased liquidity makes the market become a dual-way market. Traders can buy and sell cryptocurrencies when they want.
Remember Bitcoin in 2017? Bitcoin rose from $975 to 20,089 only to later crash. Some owners chose to hold on to their coin while others sold it off. Imagine being one of the traders that bought a cheap bitcoin then. Your risk would have paid off.
- Increased Trading in Margin Potential
Margin trading is a trading method that involves trading assets with funds provided by or borrowed from a third party. As mentioned above, the market is already very liquid, and trading in Margin allows you to access that liquidity by leveraging your position. The enormous liquidity makes trading in Margin worth the risk, and it is quite famous among traders
- Best Environment For Dollar Cost Averaging
The volatile market allows you to use the dollar-cost averaging strategy to minimize the risk of trading in volatility. The strategy will help you take the rampaging cryptocurrencies volatility. Dollar-cost averaging involves dividing your investment into small specific sums, which you invest at different times, based on a schedule. So, you don’t need to throw your weight behind a coin in a volatile period. You can just divide your investment and watch how they perform. Dollar-cost averaging has the following advantages;
- Dollar-cost averaging helps you buy the dip and help you make more when prices stabilize.
- It teaches you discipline as instead of making wild trades all over the place, you are more focused and have a goal in mind.
- It also helps you manage your emotions during a trade. Instead of fearing the volatile market, dollar cost averaging embraces it as volatility is the best environment.
Navigating a Volatile Period in Cryptocurrencies
You can navigate a volatile period in the cryptocurrency market through the following ways;
- Dollar-Cost Average.
While a volatile period gives you the advantage of using the dollar cost average, the dollar cost average is also a strategy that you can use to navigate the market in volatile periods.
- Don’t Forget to use Stop Loss Command
The Stop Loss Command option is your ally when trading in cryptocurrencies in a volatile period. This Stop Loss order feature can allow you to set a price representing the amount of loss you don’t want to exceed. So, if a trade isn’t going right, your stop-loss order can save you from further losses.
- Learn about the Coin
Don’t invest in a coin with your emotions. Research the cryptocurrency you are about to invest in for accurate cryptocurrency predictions.
Jennifer Holland is an expert writer with 3 years of experience. Jenifer is an authority in writing about education and student life. Her passion for education makes her one of the most sought-after essay writers. Jennifer is a respected essay help enthusiast and has major Australian Writing experience. She is committed to the cause of helping students develop a great career and advises them on how to achieve their dream job.
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