Volatility regimes and how to trade around them

Three practical regimes

Most sessions can be sorted into a suppressed regime where ranges hold and extensions fade, an expansive regime where moves extend and pullbacks are shallow, and a transitional regime where the market is switching between the two and behaviour is unreliable.

• Suppressed: fade extremes, expect rotation, take profit earlier.
• Expansive: hold longer, expect follow-through, widen invalidation.
• Transitional: reduce size and demand more confirmation.

Evidence that identifies a regime

Realized versus implied volatility, the width of recent sessions relative to their average, whether the market is above or below the area where dealer gamma changes sign, and how quickly pullbacks are bought all contribute to the read.

No single input is decisive. A regime call is stronger when independent evidence agrees.

Regime is the first decision

Regime should be established before setup selection. Most avoidable losses come from executing a correct tactic in the wrong environment.