Master the "Quiet-to-Loud" transition. Learn how to identify when a market is coiling for an explosive move and how to ride the momentum as volatility expands.
A volatility breakout occurs when the market transitions from a state of extremely low volatility (the "squeeze") to one of extreme volatility (the "expansion"). In the world of trading, volatility is cyclical—it always returns from low to high. By identifying periods where price action has become abnormally narrow, you can position yourself to capture the inevitable, explosive breakout move in either direction.
Look for "structural" confirmation. Before the squeeze, is there a clear support or resistance level being tested? A volatility breakout that also breaks a major structural level is always more reliable than one that breaks out into "thin air."
Because volatility breakouts often start major new trends, many traders use trailing stops to "ride the wave" for as long as possible, rather than using a fixed profit target.