Mikula Forecasting Company

Swing Projector Volatility Pattern: Part 2

This article is a follow up to our previous article discussing the Swing Projector and volatility patterns. This volatility pattern consists of two large swings. The first swing has high volatility and the second swing has low volatility. In yesterday's article the high volatility swing moved downward and the low volatility swing moved upward. Today we will show the opposite pattern. The chart below is a 5 minute chart for the December 2009 Globex Eurodollar.

On this chart there is a swing that moves from a large swing bottom to a large swing top, and I have labeled all the small swings 1 to 5. There are 5 small swing tops and 5 small swing bottoms also labeled 1, 2, 3, 4 and 5. These small swings show that the large swing has a high degree of volatility. After this high volatility swing, the next large swing downward identified by the Swing Projector had no small reversal swings.

The chart below shows the swing downward, which occurred after the high volatility swing up, moved consistently in one direction with no significant reversals. This pattern offers the trader an opportunity to see the high volatility swing and then trade the low volatility swing. The low volatility swing in this pattern represents the easiest type of swing to trade because there are no small reversals to hit a trader's stop orders until the swing is actually complete.