How to protect yourself and profit during volatile market changes?

As we all know, the financial derivative market is constantly changing, and the market situation is unknown to us at any moment. This requires us to have a strong sense of self-protection in every step we take to maximize our risk resistance.

In this article, we will use real-life examples to demonstrate how to deal with the volatilities in the financial derivatives industry to properly protect yourself and manage risk.

Ordinary Investors

First of all, for ordinary investors, in the face of severe market fluctuations and a significantly bigger-than-usual volatilities, it is necessary to evaluate whether your account positions can withstand such dramatic fluctuations. 

Take the 15-minute K line of GBP/USD for example. The positive line appears under normal fluctuations, and the number of long / short points is between 20-30 points. If the market suddenly increases, the fluctuation of a 15-minute K line may reach about 60-80 points at this time. Investors might make directional errors when trading, which may cause them to lose 2-3 times more than the normal period.

At this time, investors tend to rely on pure luck a belief that they can get more profits but forget the position control and management that they attach great importance to in normal times.

Therefore, an important reminder for ordinary investors is that when encounter severe volatility, reduce the number of trading, control the risk of positions, and pay attention to the status of available margin.

In addition, ordinary investors need to pay attention to the adjustment of leverage of various traders before large fluctuations in order to avoid unnecessary impact on their positions. 

When planning for mid- and long-term trading, investors should focus on the following risk events and evaluate your positions before distributing fund.

As an important part of the financial derivatives market, platform vendors also play a very important balancing role in the fierce market change. Platform vendors need to maintain the relative stability of spreads throughout the hugely volatile market, provide more accurate quotations, and protect themselves from unnecessary losses. 

As a result, the platform vendors have to do more and more detailed work. Currently in the market, the market generally adopts the method of reducing leverage to reduce the possible losses caused by the risk market.

Therefore, if any major market situation is anticipated, the bank chooses to reduce the leverage to avoid risk, and the platform vendors will also adjust the leverage ratio provided to the client accordingly which will all finally be fed back to the client's trading accounts.

I hope everyone can pay more attention to potential risks while trading to avoid risks and establish your own risk control mechanism in time, and finally harvest long-lasting profit.

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