Market Volatility and Increased Opportunity

The global markets are always on the move. Whether rising or falling, assets such as currencies, gold, oil, stocks, and cryptocurrencies never stay the same for an extended period of time. In fact, the value of most financial assets changes every second (when markets are open). But what does this mean? And why should you care? Simply because every time an asset price fluctuates, you have an opportunity.

The general rule is that volatile prices provide greater trading opportunities. This means that if currencies, such as the USD or the EUR, suddenly start to rise or fall in value in a short amount of time, you have increased opportunity to take advantage. However, it is important to note that asset volatility is usually accompanied by increased risk to your investment. The higher your chance to earn, the higher your chance to lose.

Movers and Shakers

What causes assets to rise or fall in value? There are numerous factors in play that could lead to volatile movements. Major global events could have extreme ramifications on market movement, such as Brexit, President Donald Trump’s election victory and the US sanctions on Turkey, just to name a few. Minor events in a specific country could also impact the markets, such as presidential tweets, company leadership changes, government press conferences, corruption scandals, and more.  

How to Take Advantage of volatility

Here are three useful methods that may help you anticipate a volatile market – and the opportunity it carries with it.

  1.       The News: Headlines will often have some impact on the markets. Their accuracy is not necessarily relevant. If the markets believe something to be true, it’s usually enough to get them moving. A classic example is the 30 billion pound bid by Comcast to purchase 30% ownership of the British media and telecommunications giant, Sky. When the news became public, Sky’s stock value jumped to an 18 year high of 35.26 USD per share.
  2.       Economic Calendars: Financial reports like the Non-Farm Payroll (NFP) in the United States heavily influence the markets. Make sure to note the release date and time of these reports, as volatility often ensues.   
  3.      Market Movers Feature: Take advantage of the eToro Market Movers Feature, that allows you to track the most volatile stocks in real time. You can get a sense of market trends and spot opportunities at their inception, rather than at the tail end.

Volatility Alerts

Market trends can shift rapidly, often with very little advanced notice. To better prepare you for possible volatility and potential profit opportunities, eToro offers a useful “volatility alerts” option that you can activate by adjusting your account settings to receive notifications. This benefit will improve your response time to market conditions and hopefully provide you with enough breathing room to act accordingly.

Don’t let rapid movement in the markets scare you. Great volatility often means great investment opportunities. While there is increased risk as well, times of high volatility are arguably a great time to invest and trade.

 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. The content is intended for information and educational purposes only and should not be considered investment advice or an investment recommendation. Your capital is at risk.