Hello everyone! Welcome back to my series on spot trading.
I said what spot trading is yesterday, and today I want to discuss volatility, and this really confused me when I first started.
I recall thinking, "How do people even make money in this mess?" as I stared at price charts and viewed prices moni alter wildly. However, everything launched to make sense once I truly grasped what volatility is and how to work with it rather than against it.
What specifically is volatility, then? Put simply, it's the amount that a coin's price fluctuates over time. Think of it like a heart ratetor, which can be steady and calm on some days and erratic on others.
So what exactly is volatility? In simple terms, it's how much a cryptocurrency's price moves up and down over a certain period of time. Think of it like a heart monitor - some days the line is pretty steady with small bumps, other days it's jumping all over the place like crazy.
When I first started trading, I used to get scared when I saw big price swings. I bought some Ethereum at $2,300 and within an hour it dropped to $2,250. I panicked and sold immediately, thinking I was about to lose everything. That was my first lesson in volatility - sometimes those big moves are exactly what you need to make money.
Here's how I learned to think about volatility in spot trading. High volatility means the price is moving a lot, which creates opportunities. If Bitcoin goes from $105,000 to $113,000 and then back to $106,000 in a day, that's high volatility. Low volatility is when it just sits around $105,000 for days without much movement.
The interesting thing is that both can be good for different strategies. When volatility is high, you can potentially make quick profits if you time your trades right. I remember one day when Solana was swinging between $95 and $105 every few hours. I managed to buy at $96 and sell at $103 within the same day.
But high volatility also means higher risk. That same Solana trade could have easily gone the other way if I bought at $104 and it dropped to $95. This is why I learned to only trade with money I could afford to lose.
Low volatility periods can be frustrating because nothing seems to happen, but they're actually great for building positions. When a coin is trading in a tight range for weeks, it often means it's getting ready for a big move. I use these quiet periods to do my research and slowly accumulate coins I believe in.
One thing that really helped me understand volatility was looking at different timeframes. A coin might look super volatile on the 1-hour chart with all these spikes and dips, but when you zoom out to the daily or weekly chart, the overall trend might be pretty steady upward movement.
I also learned that different coins have different volatility patterns. Bitcoin is generally less volatile than smaller altcoins. When I want steady, predictable movements, I stick with Bitcoin or Ethereum. When I'm feeling more adventurous and want bigger potential gains, I look at some of the smaller coins that move more dramatically.
The key lesson I want to share is this - don't fight volatility, learn to dance with it. Accept that prices will go up and down, sometimes dramatically. Use that movement to your advantage instead of getting scared by it.
Tomorrow I'll talk about liquidity and why it matters so much when you're trying to buy or sell during these volatile moments. Have any of you had similar experiences with volatility when you first started? I'd love to hear your stories!
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