Stunning volatility is the new "fact of life" that defines our age. Financial markets fall off cliffs one day, but then stage a recovery the next, only to do it all over again. The switch back and forth is emotionally draining, making us susceptible to irrational responses that can turn manageable problems into huge personal crises. But while there is danger in volatility, there is also the opportunity to profitably juggle the knives that volatility throws your way--with less risk than you might think.

The first step toward profiting from volatility is to understand why these radical ups...