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Trading Volatility with Spread Bets

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Trading while the market is volatile is very risky; that’s why you need to implement powerful techniques and disciplined approach in order to reduce the risk and eventually increase your profits. The key to succeed in volatile market is for the trader to do careful planning, thorough research, and exercise strict management from beginning to end.

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When the market is volatile, the trade numbers increase. Thus, investors trade more, believing that they can take advantage of the market’s movements and make money quickly. Most likely, extreme volatility is driven by sentiment instead of fundamentals, explaining why many traders identify a trending market when the volatility isn’t too high. If you don’t have an idea on how to trade in a volatile market, you should never attempt diving into it. Instead, seek help from experts like CMC Markets.

Traders who want to make a venture even while the market is volatile should consider opening a bet in CBOE volatility index futures. Here are some tips to implement when trading in a volatile market:

  • Plan ahead. The first thing to do when you’re thinking to trade in a volatile market is to plan thoroughly. You must identify both the entry and exit levels before making your bet.

  • Choose on smaller movements during volatile periods. Though it won’t make big money, but you can ensure avoiding potential loss.

  • Consider increasing at least 3 times your minimum stop loss when the market gets turbulent.

  • Know how to determine the volatile market from the trending ones so you can increase the chances of success in spread betting. If you have seen that the market is rising too far and too quickly, then it’s the best time to go on long volatility. You can also take a long position if the volatility and downside risks are relatively low.

Most spread betting companies in USA and UK allow traders to take a long position in a volatile market through access to VIX options or VIX futures. Volatility is also considered as a tool for measuring risk. When the volatility is higher, the risk and rewards are also greater. Likewise, the volatility trends are diverse, and changes predict the shifts in sentiment as well as the start of new trends.

A volatile market undergoes financial stress that is commonly associated with sharp market declines. In the same manner, when the stock market falls, volatility rises and vice versa. Traders should also consider other indices that measure volatility including VXN, VXO, RVX and many others that can be used for the US and international equities.

Indeed, spread betting is rewarding and lucrative, but trading, when the market is volatile, is a different thing. That’s why it’s essential for a trader to learn the ropes on how to trade in the volatile market in order to enhance the chances of gaining profits. Once you get the hang of it, it will be easier to handle the challenges that will come at you. At the same time, you can have the best opportunity to obtain profits with reduced risk.

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