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What is Crypto Market Volatility and How to Deal With It? | CoinGabbar

18 Oct 2022 By: Anirudh Trivedi
What is Crypto Market Volatility and How to Deal With It? | CoinGabbar

Key Takeaways:

  • Volatility is a useful yet one of the scariest things in the crypto markets since they can make or break your portfolio. 

  • A healthy portfolio is always insured against the market volatility. Specially for short term traders.

  • Trading with volatility may earn you profits if you follow the points mentioned below.

  • Any points mentioned below are not financial advice. 

A volatile market can be terrifying, especially for those new to investing and trading. But don’t let that word scare you away! No matter how scary the word sounds, the volatility of this market is an excellent opportunity for you to make money. Investing in volatile markets can be highly lucrative if you know how to play your cards right. 

The trick is not to panic when prices are falling or soaring beyond your expectations – you will need some level-headedness and strong nerves in order to deal with all these fluctuations. Luckily enough, there are a few things you can do to protect yourself from volatility and come out on top regardless of the current state of the market.

Understand the basics of market volatility 

It is essential to understand how the crypto market volatility works to protect yourself from extreme price fluctuations. Volatility is the tendency of an asset’s price to fluctuate over time. In other words, the higher the volatility, the higher the price of the asset will fluctuate. 

Volatility is calculated using the standard deviation, which measures how far the asset deviates from its average price. The higher the deviation, the higher the volatility. On the chart, volatility is represented by the standard deviation line. The volatility of the crypto market is high, but it does not mean that it is a bad thing, and it actually offers excellent opportunities for those who know how to play the game. If you are new to investing and trading, the most important thing to do is to educate yourself about the field and the different aspects that are involved in it.

How to protect yourself from volatility

These are a few steps you can take in order to protect yourself from volatility and minimize the damage if something unexpected happens. - 

Please get to know the market and the assets that are traded in it 

You can only protect yourself from volatility if you know where it comes from. The best way to deal with it is to get to know the market and the traded assets. 

Keep your investments diversified. 

Keeping your investments diversified is a great way to protect yourself from volatility. This means that you should distribute your assets between different types of investments to minimize the damage if one fails. 

Have a proper portfolio 

In order to have a proper portfolio, you must know your risk tolerance, your investment objectives, and your investment timeframe. You also need to consider your financial situation, investment knowledge, and resources to form a proper portfolio.  

Keep an eye on the news and developments

Keeping an eye on the news and developments is crucial if you want to protect yourself from volatility. This is because unexpected events like government regulations can lead to extreme volatility. 

Take advantage of price discrepancies

Another way to protect yourself from volatility is by taking advantage of price discrepancies. This means that you should look for price differences between different exchanges and exploit them in order to maximize your profit potential. 

Be careful with ICOs. 

While ICOs can be a great investment opportunity, they also have a lot of volatility associated with them. This is why you must be very careful with ICOs and do as much research as possible before investing in them. 

Monitor your investments

If you want to protect yourself from volatility, you must monitor your investments carefully. Start with creating a portfolio of your investments and regularly keep track of their performance. This way, you will know if the assets that you have chosen are performing well and if they are generating the expected amount of profit. If you notice that something is off, such as an unexpected drop in the value of one of your assets, you can take action immediately. You can also use this information to inform your future investment decisions.

Utilize stop-losses

Stop-loss orders are orders that are triggered once the price of an asset hits a pre-specified price. This can be a beneficial instrument in volatile times since it can protect you from unexpected drops in the value of your assets. However, keep in mind that when the price of your assets goes up, the stop-loss price remains the same, so you won’t be able to benefit from the price increase.

HODL: Don’t panic; buy the dip!

HODL stands for Hold on for Dear Life and refers to investors who hold their investments through volatility in hopes of reaping more considerable sums in the future. If you choose to HODL your investments through volatility, one thing you must remember is not to panic when the market starts to drop. If you see the value of your assets go down, don’t panic and start to sell them – the only thing that will happen is that you will lock in a loss. Instead, try to understand why the value of your assets has gone down and what can be done in order to protect them from volatility.

Summing up...

The wild world of cryptocurrency is an exciting place where new opportunities pop up daily. But, in order to make the most out of it, you must be prepared to deal with extreme market volatility. The best way to protect yourself from volatility is to educate yourself about the market, create a proper portfolio, monitor your investments, and utilize stop-losses. If the market is going down, don’t panic and buy the dip!