Loading
Market Intelligence › Basic Terminologies
Expansion after contraction, and why it keeps repeating
Published by The Retail Trader · JUL 28, 2026 · Market Structure
Volatility runs in a cycle: high after low, and low after high. It is one of the most repeated properties of the market, and it has a practical use.
When the range gets small, positions build up in one place and stops sit close to each other. In that situation even a small trigger can turn into a big move.
Conversely, after a big move the participants tire out and the range starts to contract again.
Common ways to measure compression:
• The average daily range, such as ATR, sitting well below its historical level.
• Bollinger bands squeezing together.
• A run of small candles and inside bars.
• Volume steadily falling.
This cycle does not give you timing. It can tell you a move is coming, but not when or in which direction. So the right use of compression is preparation: mark your levels in advance and decide your size in advance.
This article is for educational purposes only. It is not a buy or sell recommendation, not a claim of guaranteed returns, and not advice. Rules, rates and mechanics change from time to time at the exchanges, SEBI and the RBI, so verify every number yourself with your broker or an official source.