Indicator of Volatility
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Thread: Indicator of Volatility

  1. #1
    Super Moderator Gulfstream's Avatar
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    Indicator of Volatility

    Another type of indicators is an indicator of the market volatility. This type of indicator depend on market volatility.
    For example, lets look on indicator Average True Range (short ATR)


    Picture 1.

    In the picture 1 it is EURUSD chart, interval daily, indicator (ATR) with option 5.
    Indicator increases when market volatility increasing and falls when market volatility falling, and it no matter which trend is on market now, bullish or bearish. It is used to determine the state of the market. Note the status of the price chart and the status indicator. Once the size of the candle falls, falls and the value of the indicator. The higher volatility, the bigger dimension of the candle, and it means that the value of the indicator is higher, and vice versa.

    True Range is the highest of the following three values:
    - the difference between the current maximum and minimum;
    - the difference between the previous closing price and the current maximum;
    - the difference between the previous closing price and the current minimum.



    The indicator Average True Range (ATR) is a sliding average signification of the true range.
    It means that an indicator in the Picture 1 takes the current values ​​and counts values ​​which were 5 days back and get idication of the indicator during the last 5 days.
    If the indicator line is at the bottom, it means that volatility is minimum, and if it is on the top, volatility is maximum. Please, note, it does not pouint out the direction, as some oscillators.
    ATR indicator of volatility is good for determining of the state of volatility.
    You can find many indicators of volatility and each considers its own way, each of it has its pluses and minuses.

  2. #2
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    thisindicator is found in many strateges and ive good results and all the traders use it are pleasant for it, but i do not understand how it works actually, and i want to know if it follow the pricelike the other indicators or it has unique characteristics and can give good signals for trading or not.

  3. #3
    Quote Originally Posted by sameeh View Post
    thisindicator is found in many strateges and ive good results and all the traders use it are pleasant for it, but i do not understand how it works actually, and i want to know if it follow the pricelike the other indicators or it has unique characteristics and can give good signals for trading or not.
    I think that we should use it only when there are no news at all. If there are some news in the market then no matter what kind of indicator of volatility you are using, they will be nothing behind the news that will move the market. Certainly this is not something all traders will understand too but it will be needed if they want to really improve and change further.

  4. #4
    Average true indicator is good because when its on bottom then definitely that is oversold condition of market where market down movement is limited then its low volatility market towards down trend and when its on top then maximum volatile market but also overbought condition and we can see it from that level because up movement is limited. Its good to trade with this awesome ATR indicator.

  5. #5
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    We should always make the good sharing about the indicators with our mentors and if they suggest it then we should use it as we should never apply any kind of the indicator in our live trading account because we must never take the risk on our live trading account. Better we should apply it on demo account.

  6. #6
    Quote Originally Posted by adeelyaz View Post
    We should always make the good sharing about the indicators with our mentors and if they suggest it then we should use it as we should never apply any kind of the indicator in our live trading account because we must never take the risk on our live trading account. Better we should apply it on demo account.
    Traders should always make a good knowledge about trading and then they will need to know how much knowledge they need in here first. Getting a good mentor will be a great thing but we first need to focus in our own trading and once we have no other choice then we can try to get a good mentor all on our own. Learning from the demo account will be good thing if we do not have any mentor too.

  7. #7
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    i depend usually on the average true range in determining the expected movement in the market especially after the news let us say that there is news on the eur usd and i am expecting the euro will just go higher but i do not how much pips it can move then there are two ways , find how many pips it moved in the past in the same news and the other way is off course of ATR

  8. #8
    Though I am not a fan of technical indicator but I will try to work on this Average true indicator to see whether it can be of any help to determine the market volatility . I have used it in the past most especially in the early years of my forex trading career but it did not really work much for me but seeing it being discussed here and the considering the profile and the level of experience of Gulf Stream , I think it is really worth being visited again

  9. #9
    Interesting indicator and interesting article about getting direction for trading through ATR ,but i think these indicator work well when there is no fundamental release , i there must be any good indicator which give direction during time of news so we may get more advantages from it .

  10. #10
    Quote Originally Posted by rehmat View Post
    Average true indicator is good because when its on bottom then definitely that is oversold condition of market where market down movement is limited then its low volatility market towards down trend and when its on top then maximum volatile market but also overbought condition and we can see it from that level because up movement is limited. Its good to trade with this awesome ATR indicator.
    try adx ( average directional movement index) It shows the strength of the trend and signals increase or decrease in volatility, adx reading above 25 signals an increase in volatility and a reading below 25 means a decrease in volatility, be it a up trend or down trend, it will show the strength of the trends by the readings

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