Volatility Quality Index - page 72

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Sergey Golubev
Moderator
105698
Sergey Golubev  

Bollinger Bands.

Bollinger Bands are similar to moving average envelopes.


The difference between Bollinger Bands and envelopes is envelopes are plotted at a fixed percentage above and below a moving average, whereas Bollinger Bands are plotted at standard deviation levels above and below a moving average. Since standard deviation is a measure of volatility, the bands are self-adjusting: widening during volatile markets and contracting during calmer periods.

Bollinger Bands were created by John Bollinger.
Bollinger Bands are usually displayed on top of security prices, but they can be displayed on an indicator. These comments refer to bands displayed on prices. As with moving average envelopes, the basic interpretation of Bollinger Bands is that prices tend to stay within the upper- and lower-band. The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices.

During periods of extreme price changes (i.e., high volatility), the bands widen to become more forgiving. During periods of stagnant pricing (i.e., low volatility), the bands narrow to contain prices.

Mr. Bollinger notes the following characteristics of Bollinger Bands:

  • Sharp price changes tend to occur after the bands tighten, as volatility lessens.
  • When prices move outside the bands, a continuation of the current trend is implied.
  • Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend.
  • A move that originates at one band tends to go all the way to the other band. This observation is useful when projecting price targets.

Sergey Golubev
Moderator
105698
Sergey Golubev  

Average True Range

The Average True Range ("ATR") is a measure of volatility. It was introduced by Welles Wilder in his book, New Concepts in Technical Trading Systems, and has since been used as a component of many indicators and trading systems.


Wilder has found that high ATR values often occur at market bottoms following a "panic" sell-off. Low Average True Range values are often found during extended sideways periods, such as those found at tops and after consolidation periods.

The Average True Range can be interpreted using the same techniques that are used with the other volatility indicators. Refer to the discussion on Standard Deviation for additional information on volatility interpretation.

Sergey Golubev
Moderator
105698
Sergey Golubev  

Chaikin's Volatility indicator

Chaikin's Volatility indicator compares the spread between a security's high and low prices. It quantifies volatility as a widening of the range between the high and the low price.


There are two ways to interpret this measure of volatility.

One method assumes that market tops are generally accompanied by increased volatility (as investors get nervous and indecisive) and that the latter stages of a market bottom are generally accompanied by decreased volatility (as investors get bored).

Another method (Mr. Chaikin's) assumes that an increase in the Volatility indicator over a relatively short time period indicates that a bottom is near (e.g., a panic sell-off) and that a decrease in volatility over a longer time period indicates an approaching top (e.g., a mature bull market).

As with almost all experienced investors, Mr. Chaikin recommends that you do not rely on any one indicator. He suggests using a moving average penetration or trading band system to confirm this (or any) indicator.

Sergey Golubev
Moderator
105698
Sergey Golubev  
Volatility

  1. Volatility Expansion system! - the thread
  2. Volatility Quality Index - the thread including the following EAs:
    2.1. Volatility Quality EA v301, 
    2.2. Volatility Quality EA v302 martingle EA, 
    2.3. Volatility Quality Expert Advisor v2 EA, 
    2.4. VQ_ Ea_v2 EA, VQ_ Ea_v2a EA (MaxTraders feature with LotMultiplier were fixed), 
    2.5. VQ_ Ea_v2 ecn-1a EA, VQ_ Ea_v3 ecn EA (It is the version with regular stop loss and take profit set by default to 5), 
    2.6. VQ_ Ea_v3 EA (It is improved version of VQ_ Ea_v3 ecn EA: added a trend confirmation, using 3 different time frames; also added a time frame control for VQ indicator; all these time frames can be adjusted by the use).

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Volatility Quality - on chart - indicator for MetaTrader 5

Volatility Quality - on chart by MT5

Volatility Quality - on chart by MT5

Volatility Quality indicator made "on-chart" by bars, candles and lines.

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