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Measuring Volatility
When traders hear the work "volatility", it usually brings up thoughts of erratic markets. But in order realize profits, we need the markets to move. So as long as volatility isn't excessive, we can often use it to our advantage. The question then is "How do we determine excessive volatility"? The answer is to measure it so we know when volatility is unusual.
Volatility indicators represent their own class of indicators. One of the most commonly used volatility measurements is the Average True Range (ATR). Developed by famous technician Welles Wilder, ATR's compare price over n number of periods and includes overnight movement. The Volatility to Price Ratio is another good volatility indicator as it is normalized which allows us to compare the indicators values across multiple securities.
Stocks To Watch with: MarketPulse
The Market Pulse plugin is based on the concept of using momentum, acceleration and volatility to help us make successful trading decisions. The famous analyst, Bill Williams used the rate of change of Momentum to create the Awesome Oscillator. Before a trend in price changes, the momentum will change. Detecting this change in momentum provides us with an early indication of trend change.
The MarketPulse Acceleration Indicator is based off of Bill Williams Acceleration/Deceleration Indicator. Williams posited that the direction of momentum will change before price, and that we can determine momentum change by detecting a change in acceleration. The plug-in also uses multiple volatility measurements to help traders in any timeframe.
Learn more about Nirvana's plugin, MarketPulse
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What is Market Pulse Dot Live (MPL)?
MPL is complementary content about trading the current market with some technical analysis education too.
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Join us every Monday and Wednesday at 5:30pm EDT.
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Nirvana Systems has been creating Trading software since the 1990's. Nirvana was founded on the concept of automated trading, our CEO, Ed Downs, fell in love with the potential profits offered by the markets but quickly realized that emotions were getting in the way of success and it was too difficult to find good candidates. Nirvana Systems has been creating software that automates Trading ever since.