Re: How Can A Trader in this Business Protect Themselves Against Volatility Risk?
You simply don't make a trade for your whole capital sir 
This is true for every business. If you are profiting on spread and buying/selling currencies then you are fighting variance by having shitload of money. On the average the scenario you have mentioned will have such an outcome about half the time, the other half buy it back even cheaper and substantially increase your portfolio. You need a stash of cash, and time. You keep both BTC and fiat and simply trade it. You can use simple rebalancing techniques in between to keep your desired fund allocation.
Excess amount of bitcoins as well as fiat would be required in order to execute such trades. It is never easy for the OTC traders to buy and sell constantly in the huge price variations. You would need to establish your profile onto such exchanges like localbitcoins so that you can afford to gain a lot of buyers and sellers which would make you uplift your portfolio. This is true for every business. If you are profiting on spread and buying/selling currencies then you are fighting variance by having shitload of money. On the average the scenario you have mentioned will have such an outcome about half the time, the other half buy it back even cheaper and substantially increase your portfolio. You need a stash of cash, and time. You keep both BTC and fiat and simply trade it. You can use simple rebalancing techniques in between to keep your desired fund allocation.High volatile markets can give you risk but not in a situation where a seller sells his coins to you and eventually you instantly sell those bitcoins to the buyer.
This would quickly make you bear profits without any risk of the price drop. But you might have to face some kind of loss in case where seller sells you some bitcoins and the price drops quickly after the trade is executed and the buyer buys some amount of bitcoins in this dip. This would make you bear a loss indeed.