Strategies and tips for traders
During days of low volatility, many traders make mistakes that can cost them real money. The first of these is overconfidence. Imagine you invest 10,000 PLN and enter a position, assuming a profit of 200 PLN. With low volatility, the price often does not reach your target, and you incur costs. The second mistake is improperly setting stop-loss orders. Let's say your stop-loss is 50 PLN, but with low volatility, a so-called 'slippage' occurs, and you lose as much as 100 PLN. The third mistake is ignoring the spread - the difference between the buying and selling price. In a low volatility market, the spread can represent a larger percentage of the transaction cost, which reduces your profit.
Low volatility means smaller price movements, which makes it harder to achieve desired profit targets. With small movements, even minor mistakes in strategy can lead to losses. The mechanism is simple: if you have smaller market movements, your targets are more often unattainable, and transaction costs play a larger role. Additionally, the risk associated with 'slippage' and the spread is greater, as each loss has a larger impact on your results on low volatility days.
Assume you have a capital of 15,000 PLN. You decide to make 10 transactions during a day of low volatility, each worth 1,500 PLN. Your initial plans foresee a profit of 1% per transaction, which is 15 PLN. However, after accounting for the spread (which can be as much as 0.5% - 7.50 PLN) and slippage, your profit shrinks to just 2-3 PLN or even turns into a loss. In this way, you earn less than 30 PLN instead of the expected 150 PLN or lose 50 PLN instead of making a profit.
On days of low volatility, it is worth adopting more flexible rules:
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