Volatility is a precondition of life. Even in periods of apparent calm, there are always fluctuations of one kind or another. Nowhere is this truer than the financial markets. Even during the strongest economic times, there are always peaks and troughs. Traders expect this. In fact, many of them revel in it because the bold can often prosper. However, to say 2020 was a rollercoaster ride would be an understatement. Even the most experienced investors found 2020 tough going. Not only did the election impact the markets, but the world at large was also gripped by a pandemic.
Two Forces Collide to Create a Volatile Environment
With two major forces coming together, volatility took hold. The S&P 500 Index was caught in the eye of the storm. From 3,321 points in January 2020, the index dropped by more than 32% in March. As COVID-19 restrictions kicked in and the US economy was put on lockdown, businesses started to suffer. It looked as though the market would remain low for much if not all of 2020. In fact, given the outlook many had during the initial stages of the pandemic, some thought the S&P 500 would never recover. However, it did recover. By the close of 2020, it was higher than where it started. In fact, at 3,756 points, the index was actually stronger, in relative terms, than the Dow Jones.
However, even though the year ended better than it started, it took a series of ups and downs to get there. For those in the financial world, binary options became an important tool. This type of trading allows the investor to make money when the market value increase and decreases. Of course, this isn’t a risk-free way to trade. Anyone entering the market for the first time is advised to test the waters first. Using an approach like an online demo trading account provides the necessary resources to learn the basics of binary options. Indeed, by offering up a $10,000 virtual bankroll, aspiring traders can learn to manage volatility and trade binary options without any financial implications.
Flexibility is Crucial During Volatile Times
By experimenting in this way, traders can see how the yes/no proposition that binary options offer is useful during volatile times. However, it’s also a great way to experience how nothing is certain. Given that 2020 was tough on traders, it may have been best for novices to sit on the sidelines. The question now, however, is what will 2021 bring? Will the departure of Donald Trump and the rise of President Joe Biden stabilize the S&P 500? The obvious answer is that we don’t know. What we do know is that COVID-19 will still be an issue. No matter what policies Biden introduces, the markets will remain more volatile than usual until normality is restored.
We also know that the S&P 500 has gained 13% since the election results were confirmed. Hope that Biden will introduce news stimulus measures has buoyed the financial markets. However, there are concerns that increased interest rates will eat into these gains over the long-term. Therefore, if Biden’s reign does bring some stability, it’s not going to be a flatline. Indeed, as we’ve said, even in times of calm there are still choppy waters. Economies are complex, as are the financial markets. Biden appears to have had a calming effect on the S&P 500, but it won’t always be plain sailing. For those with an eye on the S&P 500, the key to success is knowing how to plot the right course. Binary options can certainly help but it’s important to accept that there’s always going to be volatility.