Technical analyst Jonathan Krinsky said yesterday that the current volatility of the DOW index in the stock market this year is the “narrowest first-half trading range in the history of the Dow” assuming this low volatility holds to the end of this quarter.

Is that a good thing, or a bad thing?

Personally, I’m excited about it. No predictions about the DOW or the stock market here, and I’m not giving you any buying or selling investor or swing trader advice, just my personal opinion.

There are many types of MARKET CYCLES and one of them is the “Volatility Cycle.”

This refers to the market dynamic of going into periods of contraction (low volatility), followed by periods of expansion (high volatility).

Price patterns that constitute contraction cycles are ascending, descending and symmetrical triangles and also wedges.

A well-known technical analysis pattern that also indicates a contraction pattern is the Bollinger Band Squeeze.

And then sometimes the market just creates a narrow channel for a period of time.

The exciting part is that contraction cycles are often followed by expansion cycles (a period of time where volatility kicks into high gear and covers a large range of price in a short period of time).

If you think about that last statement, that means it may provide an opportunity to make a lot of money fast. And that’s the exciting thing about trading “Expansion/Contraction Cycles” or as I call them “Ex-Con Trades.”

Below is a video on 3 approaches to trading Triangle Patterns. Enjoy!

 

 

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Investing and trading is a very individual practice in that the techniques, strategies and markets you choose should be in part dictated by your personal tolerance for risk. There is no “one-size-fits-all.” We each have our own personal risk tolerance for investing and trading.

People sometimes over estimate their ability to manage risk, being excited about the possibility of big gains. But when they experience the natural ups and downs of the markets and the economy, and they see the roller coaster of swings that their money takes in real life, they get nervous, can’t sleep and experience anxiety.

In short, their ability to make rational actions are hampered, and the quality of their life diminishes.

I recently came across a cool online 5-minute quiz developed my Rutgers University that will help you measure you personal risk tolerance for trading and investing.

It’s a quick multiple-choice quiz of twenty questions (which you can do anonymously), and at the end it gives you your personal risk tolerance score.

After you get your score, it also provides you a list of investments grouped by their potential risk and reward.

It’s fun, and you may find it insightful. Try it out here:

http://njaes.rutgers.edu:8080/money/riskquiz/

 

The S&P 500 index is often used as a measurement of the overall performance of the stock market and also as a benchmark against which investors and fund managers’ performance is evaluated.

A press release from the S&P Dow Jones Indices reported a change to how multiple share classes in U.S. indices are treated for some companies.

Previously companies with more than one class of common stock were represented only once in the index.

Under the new method, companies that issue a second publicly traded share class may have more than one share line in the index (if they meet the liquidity and size criteria), but the index will still only be comprised of 500 companies.

Currently two companies, Google Inc., and Discovery Communications Inc. already have 2 share class lines in the S&P 500 index).

It’s anticipated that 3 more companies will have additional class lines added to the S&P 500: Comcast Corp., Twenty-First Century Fox Inc., and News Corp.

This change is intended to track the overall market more clearly.

In day trading and swing trading the stock market, forex and futures, volume is one of the few tools used (along with price) that is simply a fact and not an “indicator.” Using volume and price together is important for everyone in day trading, swing trading and investing to understand and master. This video will give you some good insights along those lines.

You’re invited to subscribe to my free 5-Day Video Course by filling out the form in the right margin to get more FREE TRADE STRATEGIES along with one of my Favorite Trade Setups.