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Title: Message
I
think we should define how to measure the volatility in a specific market based
on the volatility characteristics of that market and what type of an indicator
would best fit for measuring that relevant type of
volatility.
Jose's
suggestion of ATR is one of the very best but I suppose we are not looking for
average very good solutions here.. I totally agree that there seem to
be some major problems for an average trader, but we are not trying to be an
average trader as well.
maybe
we can get to somewhere interesting brainstorming on this
topic..
regards,
Here is a related idea, picking up on this interesting theme. That
is, rather than using Bollinger Bands, which are based on a StDev function,
you can use Keltner Channels, which are based on ATR. For example, you
can set your upper and lower K-Channel bands to be 2 Average True Ranges
(over the past 20 bars, say) above and below the MA. This gives a very
nice measure of volitility and is very helpful in assessing an
impulse move out of a consolidation. When price penetrates the
K-Channel after a consolidation, you have good odds of an impulse move
and follow through in the direction of the penetration. (I'm sorry i
can't give you the code for this -- I am a Trade Station convert and just
beginning to learn MS code).
Whit
Jose Silva
<josesilva22@xxxxxxxxx> wrote:
Manuel,
Andrew, staying away from mathematical jargon if possible,
let's
concentrate on what seems to work best on the markets.
Plot and
compare these two indicators below any volatile
chart:
ATR(1);
Stdev(C,2);
It may be a subtle
difference, but I know which one I'd prefer.
And introduce Standard
deviation to a large price gap over say, 21
periods [Stdev(C,21)], and
the *increasing volatility* shown by Std
Dev *after* the event, is
simply wrong. Compare to Mov(ATR(1),21,E).
Again, from *my own
chart observations*, my view is that the ATR is
probably the more
natural measure of price volatility.
My observations and thoughts may
not be mathematically correct, but
that is the way I view volatility in
charts - not as a bunch of
abstract numbers to be manipulated
mathematically, but rather, data
points representing mass psychology at
work.
jose '-)
http://www.metastocktools.com
---
In equismetastock@xxxxxxxxxxxxxxx, "Manuel Cabedo"
<manelcabedo@x
...> wrote:
>
>> From my own chart
observations, I think that the ATR is probably
>> the best measure
of volatility.
>
> I don't think so, Jose. Volatility is a kind
of dispersion, and the
> best measure of dispersion is the standard
deviation. It is a simple
> question of statistics. With standard
deviation you can do
> quantitative assertions about the probability
of breaking a channel,
> for instance, or being exited of an
operation by a stop.
>
> Speaking of securities, I particularly
like the standard deviation
> of daily returns. The distribution of
this quantity is not normal,
> of course, but you can study it on a
heuristics base.
>
> The work of Bollinger is interesting (I am
the translator of his
> book in Spain) because he always justifies (or
tries to.) his
> methods from a statistical point of view. If someone
likes his
> bands, then reading his book is a must.
>
>
Once more, thank you, Jose. Your contributions to this forum are
>
always highly valuable (including the one about ATR...).
>
>
> Kind regards.
>
>
Manuel
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