Investors who have had money in the markets over the past two years will not be surprised to learn that since June 2007, the volatility index has risen from 16 to a little more than 79, the highest levels recorded in history.

To give perspective to just how high the volatility index climbed, think back to the chaos that followed September 11, 2001. That point, volatility “spiked” to 33. These days, as the index reports a number in the 30 range, the markets seems subdued. This is definitely not the case, which means investors can continue to profit from volatility.

The first thing investors need to do when it comes to taking a run at profit is to distance themselves emotionally from their investments. Trading software that provides signals on when to buy and sell can help in this regard, but this is something most individual investors are unable to accomplish. Think about it: we all work hard for our money and we hate to see it wasted. This is a benefit that money managers have — they haven’t worked hard for the money you invest, so if they lose, they lose your money, not theirs.

Secondly, the investor should have a good understanding of volatility. Reviewing the charts at Yahoo! Finance by typing “^VIX” in the quote box is a good start. Another essential is to understand the definition of volatility, which is simply “rate of change of the deviation from the mean.” The higher the volatility, the more quickly will stray from its mean.

Lastly, investors need is to hold back from being consumed by greed. This poses an immense challenge for most people as short-term gains often hint at larger longer-term returns. Trading system can help in this regard as well since they so effectively strip the emotion factor from any trade by focusing solely on statistical figures like volatility, momentum, relative strength and so on. Individual investors, on the other hand, focus on the potential of profit or loss.

While trading systems allow investors to remove the emotional side of investing, they are not absolutely required provided that the investors can control their greed. By eliminating emotion, investors can take advantage of the profit opportunities that volatility offers.

With more than 16 years of financial services experience, Chris believes that Dividend Funds are instrumental to proper Investment Management Strategies.