Are you trying to keep up with the constantly fluctuating markets? You’re not alone. 2022 has been extremely volatile and full of surprises for the financial markets due to the unpredictability of economic and political events.
Whether you’re a beginner or a more experienced trader, you’re probably struggling with making trading decisions as you fear you might make the wrong move.
This article will give you a better understanding of what happens during volatile market periods and what you can do to boost your trading strategies. Keep reading to find out more!
What is market volatility?
It’s a common misconception that volatility is only about prices falling rapidly, when in reality it has to do with any sudden price movement, including an unexpected rise in prices. In simple terms, an indicator of market volatility is the frequency and magnitude of price movements, whether upward or downward. Therefore, market volatility increases when price swings are larger and more frequent.
It's helpful to keep in mind that volatility is a normal part of the cycle of online trading. In this way, you can be more prepared to take control of your trading positions.
What causes volatility in the markets
Volatility is often a result of economic factors, such as financial news, interest rate changes, and fiscal policy. More recently, a leading factor has been political developments. As volatility reflects investor sentiment, any factor influencing investor behavior will influence market volatility. Markets are typically considered volatile if they rise or fall more than 1% over a long period of time.
The current state of the markets
2022 has been full of ups and downs for CFDs in every asset class, including stocks, forex, and crypto futures. Major economic and political events have shaped the market sphere throughout the year. Increasing inflation, recession fears, and the Russia-Ukraine conflict are some of the main aspects that have influenced traders’ sentiment and their trading decisions. Let’s take a look at some of the most prominent examples of market volatility this year:
Forex: Some of the most powerful currencies, such as the EUR, JPY, and GBP, experienced record-breaking lows, while on the other hand, the USD has managed to push through the turbulent global economies and is expected to go even higher by the end of the year.
Stocks and Indices: The S&P 500 witnessed one of its worst performances in decades, reflecting a bearish market sentiment.
Cryptocurrency: The crypto market is facing one of its most challenging years as the uncertainty of the economic outlook has made traders turn to safe havens rather than cryptocurrencies. For example, Bitcoin dropped by 56% during the Q2 of 2022 and is still struggling to remain above average levels.
The bottom line
An essential trader trait is being aware that online trading entails high risk as there are many factors that can impact the markets and affect your trading positions.
What can you do to be more prepared? Staying up to date with economic events is always a good idea so you can be in a better position to understand what is happening in the markets, while also practicing and adapting your trading strategies so you can be able to respond to any market condition. Log in to your Elland Road trading account to explore the volatile markets.
Risk Warning: Contracts for Difference (‘CFDs’) are complex financial products, with speculative character, the trading of which involves significant risks of loss of capital.
Disclaimer: This material is considered a marketing communication and does not contain and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
