Seeking Volatility Indicator

Hi Folks,

I would like to find an indicator for the MT4 platform that would give me a relative measure of the volatility for a currency pair. I am seeking to hold back on trades when volatility is on the wane and I need a way to measure that change in volatility. In other words I am trying to avoid chop.

I am already aware of the ADX (Average Directional Movement Index) and the BWI (Band Width, i.e. Bollinger Indicator) and have tested those and I am looking for something that is more reactive to changes in volatility.

If you are able to steer me in the direction of such an indicator other than the above two, I would sure appreciate the help.

Hope this is the right forum for this question (but I imagine if I got it wrong someone will volunteer to straighten me out - LOL).

Many thanks in advance for any assistance,
Rich

The way I measure volatility is when the pair has small bars for a while volatility is low, when the bars are bigger the volatility is high.

An easy way to see this is to watch volume. When there is low volatility the volume bars are small and vica versa.

Usually, as a rule of thumb, volatility is quite low between Noon-Midnight (EST) and the volatility picks up sharply between Midnight-Noon (EST).

Let me know if you find a way to profit from trading when volatility is higher.
Hope this helps.

Try this. I hope it helps.

Why not try ATR out? When it starts to increase in value typically more interest is coming into the market.

http://www.investopedia.com/terms/a/atr.asp

Thanks for the answer finally - I mean finally, thanks for the answer. Oh shoot, they both sound wrong, but you know what I'm trying to say.

My problem with using the bars is that they take up relative portions of the screen due to the automatic scaling of the MT4 platform and it is real easy to misjudge what a "little" bar or a "big" bar is as you move from one currpair to another.

Thanks, fguru, for the mq4. I will sure try it. But the problem with using a volume indicator in forex is that without a central clearing house for trades, the volume data is going to be very misleading and not representative of actual volume.

I am hoping to find something that gives me a numerical reading or a line chart that will measure the volatility in prices - because after all, that is where my trading and profit opportunity are waiting for me.

Thanks to both of you folks for your input.

Rich

Actually traderjai, I do now track ATR and that is not a bad idea. In fact it is my backup solution if the readers here don't come forward with some gee-whiz new thingamajig for me to use.

Thanks for the suggestion.

As I think further about this, one thing that would work would be either a range indicator that measured the swing highs to swing lows and read them out as a line chart or a histogram.

Another would be something that measured the distances between fractal highs and fractal lows and read out with a ranging numerical value.

Anybody seen anything like either of those ideas?

Actually, Volume Data is not misleading because it measures the amount of price changes per bar. A central clearing house is not necessary. I find it to be a very reliable way to measure changes in volatility. As the price changes per bar drops off, interest in the market declines. This is why the volume bars are usually quite small between Noon-Midnight (EST), because no one really has an interest at this time. The real question is how are you going to profit from trading when volatility is higher.
I wish it was so simple as to make it easier to profit when volatility is higher.
Any ideas?

People on this board are more attuned to technology and how things work, not coming up with new trading ideas. As far as I am concerned, Bollinger Bands can't be beat and if somebody has something created better, he won't hanging around this board.

Well, CodeMeister, you may well be right but I'm willing to ask and see what develops. I have always been amazed at the things I have learned from others who some were saying didn't know very much. It's all grist for the mill.

Since you have implied there is somewhere better to ask this question, perhaps you could enlighten me as to where that might be.

Rich

A concept/idea/way.
BB Width (i use it in my trading, sometimes)

Try out
http://www.forexbrace.com/content/view/124/75/
http://forexindia.onsugar.com/Bollin...icator-7617924
Hope that helps.
Regards


P.S. Long back i started a similar thread like -->this<-- without almost any reply. So replies will be not that many. Anyway let me know if you strike a fortune

Ive actually come to find that most of the new geewhiz thingamajig... well, to be frank, suck. Dont get me wrong though, it is good to know they are out there and I believe it is part of the learning process. I went through the phase of attaching any new thing to my chart and trying it out to see if it "spoke" to me. Very few actually did but Im a rather simple fellow.

Ive found that the best indicators are the same standard ones that come in mt4. These are basically industry standards and that is why they come preloaded in mt4 and other various charting packages. When I look at atr14 I know that a bank trader or big fund are seeing practically the same thing. But when I start using new fangled thingamabobs that no one but some small retail traders on a forum are using (no offense to anyone here), it is only a bunch of other retailers that are seeing it. Id rather know what the big guys are looking at because they are the ones that keep trends sustained, not a couple of guys and their mini accounts.

Now I do have what some might called custom indicators but they are all throwbacks to standard ones. They are mostly the multi-time frame indi's and every now and then I will throw a zigzag or sessions indicator. As for the rest of them, they just dont do it for me personally.

Well, as I stated in my initial posting:

[I am already aware of the ... BWI (Band Width, i.e. Bollinger Indicator) and have tested (it, but) I am looking for something that is more reactive to changes in volatility. ]

But I appreciate your effort to help, forexsaint. Disappointing to hear of your earlier effort and the resulting non-response.

Maybe I'll just have to take my fractal-low, fractal-high or swing-low, swing-high idea and get it coded. But this thread was my attempt to see if someone else had already done that. We'll see.

Well, that serves me right, I guess. I just knew that when I threw in what I was considering a humorous aside (a throwaway line, if you will) about a geewhiz thingamajig, that someone would take it as a serious desire to find some new-fangled gadget to trade the forex with. And that is a problem in a forum where we tend to give an abbreviated account of what we are trying to express. But I just couldn't find a tongue-in-cheek emoticon to place after that entry. Mea culpa.

And I appreciate the effort to disabuse yet another noob of the need to find a holy grail indicator and in noob-like fashion pile it onto the already big pile of mostly useless indicators cluttering up the unsuccessful noob's chart. Not my style nor my intention with this thread.

But I should probably have explained in my first posting when I created this thread that I have been trading the forex since late 2003 and regularly take out 300 to 500+ pips a week , trading mostly four day weeks. While not the most successful forex trader there is, I do alright.

With the query in this thread I am looking for a way to tweak (or further enhance) an already fairly successful trading method.

Specifically I have noticed that when the H1 stops trending and begins to range, that the normal signals which gave me my entry sometimes end up creating a trade that goes into a chop that no longer benefits the trade setup that was originally anticipating a run. In a worst-case scenario, my stop will be hit - a scenario many of us are familiar with. This evolving to a narrower range of bars is sometimes difficult to detect when one has not visited the currpair chart for several hours and the autosizing feature of MT4 has made the bars appear relatively larger albeit in a narrower range. Thus the eye viewing the bars may not notice the relatively tighter range.

So I am looking for an indicator that will monitor that situation for me and give me an instantly recognizable signal that the high-low range has considerably narrowed. Bollinger Band (BB) is lagging a little too much for me and the standard deviation bulges distort the Band Width Indicator (BWI), not telling me what I want to see quickly.

But I do reject the remark "new fangled thingamabobs that no one but some small retail traders on a forum are using" (also no offense to anyone here) in response to my original posting. By that line of reasoning no progress would ever be made in technical trading and Williams, Bollinger, Donchian and Wilder would never have produced and refined indicators that thousands of traders are successfully using and relying on today.

Would anyone seriously suggest that every advance in technical trading has been developed and honed and that we are now past the age of innovation and creation. Personally, I soundly reject that idea.

So to get back on topic, I am trying to find out if anyone has coded an objective indicator that would tightly measure a rapidly narrowing range on H1.

To refer to my earlier post (#7)
As I think further about this, one thing that would work would be either a range indicator that measured the swing highs to swing lows and read them out as a line chart or a histogram.

(or)

Another would be something that measured the distances between fractal highs and fractal lows and read out with a ranging numerical value.

Onward and upward!

Rich

Way to take things way out of context. Just saying what works for me.

Keep on searching for your geewhiz thinger... and have a blast doing it!

I find the ideas in Trading Systems and Trading Discussion threads sometimes innovative and the feedback is usually knowledgeable and intelligent. I would also join the many webinars sponsored by brokers and traders and ask my question there. They are the ones who have the insight and knowledge.

I tried originally posting this in one of those two - Trading Systems, but got a (gentle) smackdown when a moderator (I suppose) moved the entire thread to Platform Tech. Which is fine - probably where it should have been in the first place.

I appreciate the response and the suggestion, CodeMeister. Duly noted.

what do u mean BBs lag a little too much?
can u illustrate that point?
Thanks

OK. Since a picture is said to be worth a thousand words (or is it 10,000?) I will rely on a screen shot to get my point across (click on attached GIF file).

In this shot of the EU (EURUSD) H1 from today, this currpair made a run up causing the BB to go out to their 2.0 standard deviations.

Then the bars narrowed down to a range of about 37 pips (1st red arrow). But if I am relying on a BWI (Bollinger Bandwidth Indicator) to measure volatility, when I come around to look at this currpair, the BWI is showing me a 298 pip bandwidth (look to the right in the picture). It is too slow for me - i.e. lagging.

It isn't until 11 hours later that the BWI will show me a bandwidth of 30p (2nd red arrow).

I am looking for something that will give me a faster indication that volatility (and range) have dropped way off. I certainly can't use BB with their reliance on a collapsing standard deviation.

Hi Abinadi,

Any luck with your search? If not, I think I just stumbled on Mark Whistler's Volatility Illuminated book (check out http://www.wallstreetrockstar.com/smartmedia/) and he claims to have a wave price mass (indicator) that measures volatility from a scale of 0 to 1 and he also adjusted the BB standard deviation setting to account for data/information loss by 1.2 - 3.2 depending on the period setting, turning it into a leading rather than a lagging indicator. I am still studying his book & listening to some of his recorded seminars posted on the fxstreet website (http://www.fxstreet.com/search/contr...b-02287c7713b8). Check this out and if you understand him better or glean something of importance as a more experienced fx trader than me, pls clue me in, as I'm still trying to learn the robes and get my feet wet.

Cheers, and God bless