I would like to hear your suggestions to this.
Say you would like to have your EA avoid new trades due to extreme volatility . By volatility I mean
a big market move in either direction or a whipsaw occurring (big move in one direction following move to opposite direction simultaneously).
I would like to be able to catch the sharp moves as fast as possible.
Can you please share your views if anyone is dealing with such event.
I know there how to use the indicators that measure volatility such as ADX,ATR ,Bollinger Band the MT4 Volume indicator or by comparing the current candle to the previous candle
but I would like to hear exact criteria as to how you would decide if the volatility is above normal and when it returns back to normal.
For example please say something.
-If the 14 Period ATR on M5 Timeframe is bigger than that is high volatility, else is normal
Calculate and define what is normal.
Then calculate and define what is abnormal.
Then do a real time comparison and set your trigger accordingly.
There are/were many EAs which are working on the 'catch big movement'.For example - this old EA - DayTrading EA. This EA is using some group of indicators working on the way of correctional movement. But the general idea for this EA (which came from 2003) was to use Momentum (iMomentum) only (calculated on open price only).The very first version of this EA worked without any indicators. It worked on the following way:
So, it took 13 years: since 2003 (when this idea/EA was initially posted on some arabic forum) till 2016 (when this EA was finally improved on the other forums) to understand what to do and which indicators to use for that :)
First idea was the following:
After trading it so the people realized that the performance of this EA is related on the data quality of the brokers ... yes, spikes ... and finally - the traders/coders decided to use it for correction on opposite way:
After that - the people decided to use some indicators (on open bar too), and you can see some final versions which were posted on this thread.
It is just one example only but you can find many examples (and the theories as well) using search function of the forum for example.