It is no secret that the crypto market has experienced major volatility recently with Bitcoin in particular seeing bullish momentum after the fall of Silicon Valley Bank. While Bitcoin has climbed, other tokens have taken a fall including Binance Coin (BNB) which has recently been targeted by Chinese regulators. In fact, the month of March has been a whirlwind for the crypto space. As a result, investors should take time to tweak their trading strategy to suit a more volatile market. In this article, we will reveal some top tips for trading during high volatility so that you don’t get caught out by current market conditions.
How to trade during a volatile crypto market
The volatility of the crypto market shows no signs of stopping anytime soon. Furthermore, the economic data calendar suggests that the financial market as a whole should prepare for volatility in the coming months. Q2 of 2023 is set up to be an interesting time for investors.
Here is how to prepare your strategy so that you can continue to trade crypto despite the volatile market.
Use stop-loss orders
One of the best ways to protect yourself against volatility is to use stop-loss orders. A stop-loss is a type of order that has a predetermined closing point. When that point is hit, the order will automatically close to avoid losing more than you can afford to.
There are a number of different strategies that can be used to calculate a stop-loss. Each trader will use a slightly different method that works for their individual trading style. During a volatile market, prices can move very quickly so setting a stop-loss is a good way to control how much you lose in case the market takes a sudden plummet.
Avoid emotional decision making
Volatile market conditions can spark a range of emotions among traders. It is easy to quickly change between elated and fearful due to large price fluctuations – you may be trading in profit one minute and at a major loss the next.
No matter how extreme the volatility gets, it is important to stay calm and avoid emotional decision-making. Emotional decisions could lead you to take big risks that you otherwise would have avoided. Instead, clear your head and make research-based decisions that are risk managed.
Diversify your portfolio
One way to hedge against potential loss is to diversify your trading portfolio with various different crypto assets. By doing this, you could potentially cancel out a loss with another token that makes a profit.
The best way to diversify when trading crypto is to choose crypto assets that all have different use cases. For example, Bitcoin (BTC), Ethereum (ETH) and Decentraland (MANA) are three crypto assets with different utilities. Therefore, if one takes a dip the others may stabilise or even see growth.
Overall, it is important to review your trading strategy when the crypto market becomes volatile. Taking time to do this will reduce your chances of loss in the long run and help you to take advantage of new market trends.