Cryptocurrencies are highly volatile, meaning that their prices fluctuate continuously, and often dramatically, all the time. For some traders, this is an opportunity not to be missed.
High Volatility = High Profit: Betting on the Market Both Ways
Since the peak of the bull run in 2021, when many analysts were calling for a $300,000 Bitcoin (BTC) price, most crypto assets have followed a general downward trend. But while a dip in the market may be bad news for some investors, there are plenty of opportunities to profit from crypto's infamous volatility. In fact, volatility is a dream come true for many traders as they can make money whether the market goes up or down.
Bitcoin's epic bull runs have historically captured the imagination of many investors looking to cash in on its meteoric rises. However, when the market starts selling off, and sentiment flips bearish, many new investors are spooked into selling their assets at a loss.
Since human psychology tells us that most people feel the pain of loss more acutely than the joy of gain, volatility in investing may not be palatable to every investor. But cryptocurrency's notorious volatility is often seen as the number one factor deterring many investors. However, for experienced traders with a higher tolerance for risk, high volatility = high profit. Crypto's volatility presents them with a way of making money whether the market goes up or down.
Traders can take advantage of volatility by trading dated or perpetual futures to lock in profits from market movements by taking out a short or long position (shorting or longing the market). A long position means betting on the asset's price going up, and a short position means you believe the price will go down.
While volatility can keep some market participants at bay, it's crucial for short-term traders. If there is no volatility in an asset, there is no chance of making a profit. This makes cryptocurrencies a paradise for many traders who are attracted by their high-risk, high-reward nature. Since cryptocurrencies fluctuate in price from minute to minute, even second to second, day traders, known as "scalp traders," can rack up continuous small profits on even the smallest of price fluctuations.
Another style of trading that relies on volatility is swing trading, which works with a slightly longer time horizon of days or weeks, capturing the trend as the price zigzags back and forth. Of course, predicting market moves is not an exact science, and these types of traders will also absorb many losses during their trading sessions. To facilitate their calculations, short-term traders use charts and other technical indicators such as relative strength index (RSI), Bollinger Bands, volume, and established support and resistance levels.
Highly volatile assets can provide almost infinite opportunities for traders to make continuous profits even when the price trades sideways or gets locked in a tight trading range for a long period of time.
While seasoned traders can take advantage of futures and perpetuals on the EQONEX platform, it's not just short-term traders that can benefit from volatility. More risk-averse conservative traders tend to buy assets and hold them for an extended period, sometimes even years.
While volatility can be offputting in the short term, these investors believe in the general long-term upward trend of the asset's price. Therefore, they can take advantage of price drops to accumulate more assets. This is known as "buying the dip " in the trading world." As the price of digital assets fluctuates, this allows investors to buy in at a lower price and wait for cumulative growth later on.
Shorting or longing the price of digital assets through futures and perpetuals allows traders to win (or lose) money even in a bear market or a sideways market, rather than simply holding their assets. Volatility is far from a bad thing and is actually the cornerstone of many traders' strategies, even long-term holders.
This is not trading advice. All trading carries a risk.
Unlike buying and holding, trading perps lets you participate in the market right away without having to take custody of the underlying asset and with only a fraction of the capital needed to purchase an asset outright.
Crypto Jack Explains How to Cash In With Dated Futures. Traders can use dated futures to lock in profits, hedge exposure to an asset, create low-risk yield trades, or aggressively speculate on an asset's price using leverage.
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