Yeah, I hear
what you’re saying… Bollinger himself admits that statistical rules
only hold generally and regression to the mean is not as strong as it should be,
but it doesn’t matter as the general case is good enough. And who am I to
argue with him? But he also states in his book that volatility is cyclical “even
when price is not”. So given that Ehler is also into cyclicity I would
have thought there might be some overlap of research there?
From a
practical perspective, I’m with Jose…my
maths is far too rusty to try to argue why, but in my experience ATR is simply
much more responsive as a direct measure of volatility. I suspect it’s
something to do with the fact that it doesn’t make any assumptions about
mean reversion, but I can’t pursue that line of thought as my head is
already aching!
From:
equismetastock@xxxxxxxxxxxxxxx
[mailto:equismetastock@xxxxxxxxxxxxxxx]
On Behalf Of mgf_za_1999
Sent: Tuesday, May 17, 2005 8:38
AM
To: equismetastock@xxxxxxxxxxxxxxx
Subject: [EquisMetaStock Group]
Re: ATR-based volatility
Just a comment, std dev does not *require* a normal distro. You
can
just as well calculate the std dev, using the
normal formula, of any
distro, even fat tailed ones. Just like the
mean can be used for many
distros, it does not depend on the distro being
normal.
Maybe a weighted std dev (like value at risk calcs
use) or the GARCH
model (volatility clusters) will address the
problem.
Here is a weighted stddev (I think, not tested in
MSFL)
Periods:=Input("Periods?",10,9999,30);
DRet:=C/Ref(C,-1)-1;
SqrRet:=DRet*DRet;
sqrt(Mov(SqrRet,Periods,E)-Power(Mov(DRet,Periods,E),2));
which is very similar to RiskMetrics' VAR
formulae.
Regards
MG Ferreira
TsaTsa EOD Programmer and trading model builder
http://www.ferra4models.com
http://fun.ferra4models.com
--- In equismetastock@xxxxxxxxxxxxxxx,
"TecloGeo" <teclogeo@xxxx> wrote:
> All this talk of standard deviation reminds
me of Ehler's use of the
Fisher
> transform. As he states - the transform
"changes the probability density
> function (PDF) of any waveform so the
transformed output has an
> approximately Gaussian PDF". The reason
that there is huge lag for
the st
> dev on sharp moves is because normal price
behaviour does not fit a nice
> bell-shaped curve - sharp moves are often in
the "fat tail"
territory of the
> PDF (i.e. the low probability/high impact
events at the extremes) -
whereas
> st dev relies on a purely normal
distribution.
>
>
>
> Can these fat tail events be smoothed with
the Fisher transform so
that st
> dev can be applied more appropriately to a
more normal-looking
Gaussian PDF?
> The Fisher transform has been used to great
effect on prices and
> oscillators.just wondering if there has been
any application of it
in the
> respect of volatility measures? Not aware
that Ehler himself has
done any
> work on volatility.maybe there's a good
mathematical reason for this?
>
>
>
>
>
> _____
>
> From: equismetastock@xxxxxxxxxxxxxxx
[mailto:equismetastock@xxxxxxxxxxxxxxx]
> On Behalf Of mgf_za_1999
> Sent: Tuesday, May 17, 2005 6:55 AM
> To: equismetastock@xxxxxxxxxxxxxxx
> Subject: Re: [EquisMetaStock Group] ATR-based
volatility
>
>
>
> The following study, which, please note, is
very theoretical, looks at
> volatility in a lot of markets.
>
> http://www.monep.fr/pub/clive.pdf
>
> Just skip all the math stuff and go to page
60 if you are interested
> in this. There they start tabulating
results of different techniques
> and comment on the performance.
>
> Regards
> MG Ferreira
> TsaTsa EOD Programmer and trading model
builder
> http://www.ferra4models.com
> http://fun.ferra4models.com
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx,
"dr.torque" <drtorque@xxxx>
wrote:
> > 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,
> >
> >
> >
> > Dr. Torque
> >
> >
> >
> >
> >
> > -----Original Message-----
> > From: equismetastock@xxxxxxxxxxxxxxx
> [mailto:equismetastock@xxxxxxxxxxxxxxx]
> > On Behalf Of Whit
> > Sent: Monday, May 16, 2005 1:13 PM
> > To: equismetastock@xxxxxxxxxxxxxxx
> > Subject: Re: [EquisMetaStock Group]
ATR-based volatility
> >
> >
> > 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@xxxx> 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
<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
> >
> >
> >
> >
> >
__________________________________________________
> > Do You Yahoo!?
> > Tired of spam? Yahoo! Mail has the best
spam protection around
> > http://mail.yahoo.com
> >
> >
> > _____
> >
> > Yahoo! Groups Links
> >
> >
> > * To visit
your group on the web, go to:
> > http://groups.yahoo.com/group/equismetastock/
> >
> >
> > * To
unsubscribe from this group, send an email to:
> >
equismetastock-unsubscribe@xxxxxxxxxxxxxxx
> >
<mailto:equismetastock-unsubscribe@xxxxxxxxxxxxxxx?subject=Unsubscribe>
> >
> >
> > * Your use
of Yahoo! Groups is subject to the Yahoo! Terms of
Service
> > <http://docs.yahoo.com/info/terms/>
.
>
>
>
>
>
> _____
>
> Yahoo! Groups Links
>
> * To visit your
group on the web, go to:
> http://groups.yahoo.com/group/equismetastock/
>
> * To
unsubscribe from this group, send an email to:
> equismetastock-unsubscribe@xxxxxxxxxxxxxxx
>
<mailto:equismetastock-unsubscribe@xxxxxxxxxxxxxxx?subject=Unsubscribe>
>
> * Your use of
Yahoo! Groups is subject to the Yahoo!
> <http://docs.yahoo.com/info/terms/>
Terms of Service.
Yahoo! Groups Links