Increased risk with more market volatility
The management of risk is an important (if not the most) job of anyone who takes their trading seriously. Without proper risk management anyone will become an ex-trader very quickly.
When it comes to retail traders the most common risk management techniques are stop losses and working with risk units. Whilst some might even go as far as to hedge. This is a more advanced method for seasoned traders who, for example, trade for a living.
One aspect which does not get mentioned enough is the increased risk during above average market volatility. Your risk increases automatically, especially when managing a portfolio.
Volatility does create immense opportunity, especially for day/swing-traders, but it will also force you to think about your exposure to the market.
If the average market volatility is 0.50% on an asset with a $1.000.000 portfolio you will either win or lose $5.000 a day during normal market volatility.
(1.000.000 x 0,005 = 5.000)⠀
However, if for some reason the market volatility doubles (1.0%) you are automatically prone to lose double the amount. You have now increased your risk by 100% by doing nothing.
You can only combat this by halving your exposure to the market.
During meetings with professional traders, the manager may ask their traders to sell half of their assets during increased volatility. They would have to sell $500.000 worth of assets if they have a $1.000.000 position. This again comes back to risk management being a top priority.