The most recent economic upheaval and market swings made trading surprisingly more active. While volatile market conditions can offer great opportunities for spread betters, experts warn that the risks associated with the volatility of markets are correspondingly very possible.
The Financial Times has reported that based on spread betting experts, traders are actively trying to take full advantage of the recently observed market volatility, expressing more preference to trade indices rather than that of stocks of individual companies.
Market volatility has spiked up in recent months, especially with regards to the equity market on the account of the ongoing debt crisis experienced by the Eurozone as well as the close possibility of an exit of the Greek government from the single currency.
The previous months alone, the FSTE 100 index for example had a trading range of approximately 600 points, whereas the FTSE Volatility Index reached its peak level in almost two years, which is very interesting in terms of giving more opportunity in price swings.
It’s really not a surprise that one of the predispositions observed by spread betting providers is that trading volumes are increasing parallel with volatility. Although there are more conservative traders who don’t get diverted by sharp market movements, spread betting brokers tend to relatively agree that most investors will be very likely to be a lot more active in volatile conditions even if the trades in question are not always turning out positive.
Spread betting brokers insist to stop loss orders which can help mitigate risks if market volatility begins working against the favour of the trader. Standard stop losses will not be adequate for the full risk protection in the case of price “gaps” and for that very reason, a guaranteed stop loss which comes a lot expensive in price but will provide a bigger safety coverage.
The other similar trend among traders in volatile environments is the market preference towards trading indices. In particular, a renowned spread betting company noted that a lot of its clients have stopped focusing on individual stocks and turn to indices such as the FSTE 100 in case of the markets falling down.
Although it is the indices that tend to attract traders in the most volatile times, currency trades are also a common choice in trading. With the Eurozone crisis being among the major factors for market volatility, it has placed foreign exchange in the spotlight as well. When it ultimately comes to commodities, analysts note that crude oil prices are typically much preferred by traders.