How to trade cryptocurrency in volatile markets

In Trading Strategies

When you arrive at a beach, one of the first things you’ll notice is the ocean. Are there destructive waves, rising up high before crushing down? Or perhaps there’s a gentle swell, just enough to give the beach some character.

If you’re at the beach to relax in the water, huge waves could be downright dangerous. On the other hand, a surfer would be unimpressed with still water.

Crypto markets are much like the ocean. Depending on your trading purpose and experience, market conditions may either be favorable or dangerous, while transitions between highs and lows could range from minimal to enormous.

The Bitcoin volatility problem

Over the last few months the price of Bitcoin has steadily increased. If you have been attempting to trade this movement, you will have noticed that despite the up-trend, it’s not as easy as it seems to pick an entry point and ride the wave.

Back when Bitcoin was trading around 8,000 USD, the longer, heavier drops were around 500 USD. If you entered a long position just before prices fell, you would have found yourself in an unfavorable position.

However, Bitcoin has recently reached 14,000 USD and then dropped back down to around 10,000 USD. The price fluctuations at this level are multitudes larger than they were when price was consolidating around 8,000 USD.

Where price is now, a 500 USD drop can happen in minutes as a casual swing, whereas before, this was a significant drop.

Markets move in percentages rather than absolute dollar value. A 5% move when BTC is at 15,000 USD is much larger than when BTC is at 5,000 USD. As such, it’s a dangerous place for inexperienced traders.

Compare these corrections at 8,000 USD and 14,000 USD.


The correction down from the 14,000 USD was much more brutal for traders who didn’t see it coming. Pro traders love volatility, while for others it can be a nightmare scenario.

It’s just like being at the beach: everyone is looking for something different.

How to trade cryptocurrency in volatile markets

  • Be careful. This should be your mantra.
  • Reduce your trading amount. Since the market is moving more, you can make and lose the same by trading less.
  • Be patient. Don’t jump at every opportunity. Wait for the right one.
  • Manage your risk.
  • Make sure you are cautious with how much you are trading, relative to your funding account. If you were making 0.5 BTC longs when BTC was at 5000 USD, you were trading with $2500. If you make a 0.5 BTC long now you are trading with more like 6000 USD.

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