How to Profit from Low Volatility?
Trader’s dreams are high Volatility 24hours a day. Low Volatility Trading is boring, and your trading system will likely not give you as many trades as you expected.
Whoever has trade Bitcoin and other cryptocurrencies knows that, even if this space is highly volatile, we can experiment 1 to 2 weeks of low Volatility.
So how to perform when Volatility is low? How to reach your trading objectives?
The MOVE Contracts: A volatility Trading Index
MOVE Contracts are daily, weekly and quarterly contracts. In other words, Daily contracts are contracts that expire at the end of the day. Weekly contracts expire at the end of the week, etc…
The MOVE Contract value corresponds to Bitcoin’s price difference between the contract’s opening and closure. If Bitcoin opens its day at $10,350 and ends up at $10,630, the MOVE contract will expire at $280.
Like any futures contract, you can long or short the MOVE Contract.
You may have understood the goal of those contracts. It is all about Volatility!
How to expect Volatility to move?
You are probably telling yourself: “He’s funny, but it’s already hard, even impossible to predict the price, now he’s expecting us to predict the volatility?”
If you checked our Price Action Course, it is not so hard indeed. Trading is often resumed to whether it is going down or up at a certain level. Trading aggressively with patterns is about expecting a figure to break in a specific direction.
If you monitor one of those patterns on your chart, you can long a MOVE contract and not worry about the breakout direction.
In a situation where BTC is ranging sideways, and you see wicks looking for trader’s stop-losses, you probably don’t want to get chopped. Instead, all you can do is short the MOVE contract.
Where to trade Low Volatility and MOVE Contracts?
They provide you with daily, weekly, and quarterly contracts.
Is it safe trading Low Volatility on MOVE Contracts?
Remember that no market is safe and secure. Trading Low Volatility by going on MOVE contracts will not make you rich in a few weeks.
When BTC price moves about 5 or 10%, MOVE contracts can quickly make +100% and more.
On the other hand, if Bitcoin stays flat, the contract can quickly go close to 0.
As you might understand, the MOVE Contract is not something you will be betting all your capital. Contrarily, it will help you reach your trading objectives whenever the market becomes dull and extremely low volatile.
If you wish to learn more about FTX MOVE Contracts, visit their help page.
Low Volatility Trade Example
After the COVID Crash, the BTC rallied in a shape of a Falling Wedge. Even though this pattern is considered as bearish, you do not want to short it. Instead, you chose to long the MOVE quarterly contract.
After the breakout, the MOVE contract goes up +60%, and you can take your profits.
From June to August, the price was ranging sideways in a boring triangle. The same process as with the Falling Wedge example, you decide to long the MOVE Contract.