Trading Volatile Markets

Spread bets also provide the huge variety on which frequent dealers can thrive, allowing traders to play a wide range of currencies, commodities, indices and small cap foreign shares. But not just that. A principal benefit of trading forex, CFDs and spread bets is the opportunity to find profit potential in both rising and falling markets. Since the market can go up or down at a moment’s notice, volatility can work to your advantage—if you know how to use it.

The rise in volatility and the broad-based liquidation in the financial markets is a reflection of deleveraging and risk aversion. As long as the markets remain unstable, these trends will continue. If all of the efforts made by central banks around the world finally work and confidence returns, then we could see a recovery. Since the timing of any recovery is unclear, it is extremely important for traders to exercise caution and only seek high probability trades.

Volatility is one of the factors that draw many traders to spread trading and the stock markets. However, the recent volatility caused by the global financial crisis has given even some of the most risk-tolerant traders cause to rethink their strategies or take a break from trading altogether and wait for calmer markets.

But volatility also offers great opportunities for those spread traders willing to take the time to carefully study both the technical and fundamental aspects of market movements and reassess their approach to risk management.

Remember, all traders incur losses from time to time, but the most successful traders stick to their strategies and employ the technical, fundamental and risk-management tools at their disposal to try to ensure that their potential profits outweigh their losses.