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A smarter way to measure volatility?

  • #1
  • First Post: Edited Aug 23, 2016 4:30am Aug 20, 2016 5:03pm | Edited Aug 23, 2016 4:30am
Hello traders! I think we all understand that there is great value in studying market volatility, but it seems our tools for doing so are somewhat limited. What I mean is we have the ATR, ADR, Bollinger Bands, but those studies incorporate information from periods that I really don't trade in like the overnight session and end of US session. Basically our volatility indicators use data from irrelevant time periods and average it in. The result is a more inaccurate prediction of average volatility for the period we might be interested in.

What if there were a measure of volatility that only calculated the average (or median) volatility from a certain time-period of each trading day like the European or the US session. Better yet why not only calculate the average (or median) volatility of that certain period on specific days of the week and month. Better yet why not make it time-period wise highly customizable. You could choose specific hours and a specific day of the week and month.

I'm thinking of a customizable indicator that can average (or median) the price range of a selected hourly period in one weekday in every month. For example 7.00-12.00 UTC for every Thursday of every second week of every month. A customizable indicator would let you change the study periods as needed.

Lets say you take a trade from a resistance or support level and need a high probability target that would be met before the end of the session. Such an indicator would give you such a target. Also having such a forecast range would help set a stop loss that is out of the range and thus not very likely to be hit.

I'm not a programmer so I can't create such an indicator, but I think it shouldn't be too hard of a task. Perhaps such an indicator already exists in which case please point me in the right direction.
  • #2
  • Aug 20, 2016 8:23pm Aug 20, 2016 8:23pm
You don't need an indicator...
your on the right track... Look at time of days... Market opens (london, asia usa), market lunches, and market closes.
Also look at News events, and speeches which market may be waiting for... or reacting too.. which may cause an increase in volatility.
Also time of year... is it summer or Christmas time generally slower...

you know volatility is increasing if candles are getting bigger. thats your indicator....

you may want to map these times of day out on your charts.
I usually put A london session on my chart... from there I can figure out the rest..

But best to use Japanese candle sticks... and the price structure they make as your guide.. and keep your chart as free from other junk as much as possible.

Most new people want way too many indicators... and spend very little time looking at the japanese candles.
and I'm not talking just candle patterns you find in a book, the whole structure of the market... Quick jumps up... slow grinds.. consolidation they are all telling a story.
The only system that will work is one designed by and for yourself.
  • #3
  • Aug 20, 2016 9:30pm Aug 20, 2016 9:30pm
Better yet, you should learn to code. Better yet, you should pay a coder to make it for you.

How can you be lazy and expect someone do the work for you?
When you lose, I'm the loudest who laugh at your face )
  • #4
  • Aug 21, 2016 12:23am Aug 21, 2016 12:23am
Quoting Deitreider
Hello traders! I think we all understand that there is great value in studying market volatility, but it seems our tools for doing so are somewhat limited. What I mean is we have the ATR, ADR, Bollinger Bands, but those studies incorporate information from periods that I really don't trade in like the overnight session and end of US session. Basically our volatility indicators use data from irrelevant time periods and average it in. The result is a more inaccurate prediction of average volatility for the period we might be interested in. What if...
Perhaps modeling stochastic process? Or forecasting future volatility using autoregression as that should give you an edge.
Quant Trader - My Blog: quantstop.blogspot (dot) com
  • #5
  • Aug 21, 2016 12:52am Aug 21, 2016 12:52am
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GUYS BE AWARE FROM HUNTING YOUR STOP LOSSES BY YOUR BROKER & BY "GHOSTS"
  • #6
  • Edited 2:35am Aug 21, 2016 2:16am | Edited 2:35am
Quoting bloodpoodle
You don't need an indicator... your on the right track... Look at time of days... Market opens (london, asia usa), market lunches, and market closes. Also look at News events, and speeches which market may be waiting for... or reacting too.. which may cause an increase in volatility. Also time of year... is it summer or Christmas time generally slower... you know volatility is increasing if candles are getting bigger. thats your indicator.... you may want to map these times of day out on your charts. I usually put A london session on my chart......
That is not good enough, because you wont be able to factor in enough relevant information to get a decent period-specific average measure of volatility just by looking at a few samples.

Quoting Zelo
Better yet, you should learn to code. Better yet, you should pay a coder to make it for you. How can you be lazy and expect someone do the work for you?
I should have learned to code yes. I might even pay for such an indicator, but as I see there are people here willing to do some free coding and surely this kind of indicator will benefit a lot of us then I will leave the idea here.

Quoting aroxalot
{quote} Perhaps modeling stochastic process? Or forecasting future volatility using autoregression as that should give you an edge.
That is beyond my abilities.

@Samer1970 - Yes you show the limited tools we have right now. That is why I started this thread to perhaps arrive at better smarter volatility measures.
  • #7
  • Aug 21, 2016 3:05am Aug 21, 2016 3:05am
Quoting Deitreider
Hello traders! I think we all understand that there is great value in studying market volatility, but it seems our tools for doing so are somewhat limited. What I mean is we have the ATR, ADR, Bollinger Bands, but those studies incorporate information from periods that I really don't trade in like the overnight session and end of US session. Basically our volatility indicators use data from irrelevant time periods and average it in. The result is a more inaccurate prediction of average volatility for the period we might be interested in. What if...
Do you mean something like this: http://www.scalp-trading.com/forextools/eurusd/
It is a statistic for the pip movement for every day in the last 52 weeks.
sorry for that it is in german but i think you will understand the meaning. These are just for days not best trading hours, so maybe it could be improved
(.)(.) think first ...
  • #8
  • Aug 21, 2016 4:36am Aug 21, 2016 4:36am
Quoting maximumguita
{quote} Do you mean something like this: http://www.scalp-trading.com/forextools/eurusd/ It is a statistic for the pip movement for every day in the last 52 weeks. sorry for that it is in german but i think you will understand the meaning. These are just for days not best trading hours, so maybe it could be improved
Yes, this is a step closer, because it separates days of the week. Thank you very much for finding it! Still even this will incorporate the volatility of all sessions and all weeks of the month.

I'm thinking of a customizable indicator that can average the price range of a selected hourly period in one weekday in every month. For example 7.00-12.00 UTC for every Thursday of every second week of every month. A customizable indicator would let you change the study periods as needed.
  • #9
  • Aug 21, 2016 4:54am Aug 21, 2016 4:54am
Quoting Deitreider
{quote} Yes, this is a step closer, because it separates days of the week. Thank you very much for finding it! Still even this will incorporate the volatility of all sessions and all weeks of the month. I'm thinking of a customizable indicator that can average the price range of a selected hourly period in one weekday in every month. For example 7.00-12.00 UTC for every Thursday of every second week of every month. A customizable indicator would let you change the study periods as needed.
the idea is not bad, reminds me a little bit at the swap trading strategy
(.)(.) think first ...
  • #10
  • Aug 21, 2016 3:35pm Aug 21, 2016 3:35pm
Quoting bloodpoodle
You don't need an indicator... your on the right track... Look at time of days... Market opens (london, asia usa), market lunches, and market closes. Also look at News events, and speeches which market may be waiting for... or reacting too.. which may cause an increase in volatility. Also time of year... is it summer or Christmas time generally slower... you know volatility is increasing if candles are getting bigger. thats your indicator.... you may want to map these times of day out on your charts. I usually put A london session on my chart......
I agree with bloodpoodle. In addition to London/New York session open/lunch/close and timing of major news items each day, also look at the Wall Street open (9:30 am EST) and the NY Cut (option expiries at 10:00 am EST each day).
  • #11
  • Aug 22, 2016 1:05am Aug 22, 2016 1:05am
Quoting pakeha
{quote} I agree with bloodpoodle. In addition to London/New York session open/lunch/close and timing of major news items each day, also look at the Wall Street open (9:30 am EST) and the NY Cut (option expiries at 10:00 am EST each day).
With a highly customizable volatility indicator that I described we could get averages of all those periods separately. The idea is to get a statistically valid data sample to trade better during the periods you mentioned. Knowing the times of market opens/closes and news is not enough. A specific volatility measure would allow a trader to set targets and stops suitable for that period with an aim of not leaving trades overnight.
  • #12
  • Aug 22, 2016 4:04pm Aug 22, 2016 4:04pm
Found a few more websites that offer a more time-period specific look at average historical volatility:

1. https://www.mataf.net/en/forex/tools/volatility

2. http://www.forexmarkethours.com/volatility/05/

Still not as deep-looking as I would like, but better than simply looking at ATR, Bollinger Bands or ADR.
  • #13
  • Aug 23, 2016 2:16am Aug 23, 2016 2:16am
I like the idea you presented.

For instance, i have one (or two) indicators doing just that.

- Xi-Sessions - highly customizable.

Attached Image (click to enlarge)
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- Break the Box - simple yet effective.

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  • #14
  • Edited 5:03am Aug 23, 2016 3:44am | Edited 5:03am
Quoting redwed
I like the idea you presented. For instance, i have one (or two) indicators doing just that. - Xi-Sessions - highly customizable. {image} - Break the Box - simple yet effective. {image}
Thank you for posting these indicators. As I understand they help to mark specific periods in each trading day, but they don't forecast ranges based on averages (or medians) of specific past ranges. The code in these indicators could be integrated to make a deeper analyzing and forecasting range indicator, but as I said before I have no mql coding ability.

I'm thinking of an indicator that could for example collect range data for 7:00-12:00 every (better a chosen number) Tuesday of every second week of every month and make a range forecast based on the average or median of that data if we currently are in such a period.

Lets say you take a trade from a resistance or support level and need a high probability target that would be met before the end of the session. Such a indicator would give you such a target. Also having such a forecast range would help set a stop loss that is out of the range and thus not very likely to be hit.
  • #15
  • Aug 23, 2016 5:20am Aug 23, 2016 5:20am
Quoting Deitreider
{quote} Thank you for posting these indicators. As I understand they help to mark specific periods in each trading day, but they don't forecast ranges based on averages (or medians) of specific past ranges. The code in these indicators could be integrated to make a deeper analyzing and forecasting range indicator, but as I said before I have no mql coding ability. I'm thinking of an indicator that could for example collect range data for 7:00-12:00 every (better a chosen number) Tuesday of every second week of every...
It's unlikely to happen. You will need some coding ability (++some fee to pay if you wont be able to do it).

I have built some custom indicators with some freelance, and i don't use them most of the time. It's simply because, an idea struck to my head and then i think it will work for me - without any given statistics/past success.

You're trying to predict the future by 'forecasting' range? I guess the end result will become redundant.

My take on this would be:

1. do some blueprint on how it operates.
2. do some backtesting. Put the results in your excel. I can't do it automatically, so i'm manually entering every piece of information.
3. find some freelancer to do the work. You can try your luck at the "I will code your EAs and Indicators for no charge" thread if you wanted to.
  • #16
  • Edited 9:52am Aug 23, 2016 6:22am | Edited 9:52am
Quoting redwed
{quote} It's unlikely to happen. You will need some coding ability (++some fee to pay if you wont be able to do it). I have built some custom indicators with some freelance, and i don't use them most of the time. It's simply because, an idea struck to my head and then i think it will work for me - without any given statistics/past success. You're trying to predict the future by 'forecasting' range? I guess the end result will become redundant. My take on this would be: 1. do some blueprint on how it operates. 2. do some backtesting. Put the results...
Yes, presently it seems unlikely to happen. The idea struck in my head when I was looking at ATR and ADR and thought why would we consider the values of those indicators relevant when they incorporate a lot of irrelevant data. My thinking is that the economic calendar mostly repeats every month. Some days have more high impact events than others. Thus there should be some similarity between days with the same economic releases. I understand that calculating such an average range or median range will not give us precise highs/lows, but simply on average we should have a better range forecast than ATR, ADR or Bollinger Bands can give us. Of course this is untested. I'm already trying to make a better volatility forecast with the help of excel, but haven't yet been able to figure out how to sort and filter the data effectively.
  • #17
  • Oct 22, 2016 3:51am Oct 22, 2016 3:51am
Quoting Deitreider
{quote} Yes, presently it seems unlikely to happen. The idea struck in my head when I was looking at ATR and ADR and thought why would we consider the values of those indicators relevant when they incorporate a lot of irrelevant data. My thinking is that the economic calendar mostly repeats every month. Some days have more high impact events than others. Thus there should be some similarity between days with the same economic releases. I understand that calculating such an average range or median range will not give us precise highs/lows, but simply...
Are you still following this thread? I have few ideas that may of help.
  • #18
  • Oct 22, 2016 5:07am Oct 22, 2016 5:07am
Quoting redwed
{quote} Are you still following this thread? I have few ideas that may of help.
Well I considered the thread dead due to lack of interest. I myself am of course still interested in the idea, but someone has to write the code, which I don't know how to do.
  • #19
  • Oct 22, 2016 11:01pm Oct 22, 2016 11:01pm
Quoting Deitreider
{quote} Well I considered the thread dead due to lack of interest. I myself am of course still interested in the idea, but someone has to write the code, which I don't know how to do.
There's no indicator that can do just like you wanted it. The easiest way to do it is: post your interest here at mql5 freelance.

Quote
I'm thinking of an indicator that could for example collect range data for 7:00-12:00 every (better a chosen number) Tuesday of every second week of every month and make a range forecast based on the average or median of that data if we currently are in such a period.

This tool compiles volatility based on days in weeks.

Attached Image (click to enlarge)
Click to Enlarge Name: mataf.png Size: 60 KB


It also can calculate volatility based on hours, months and many other options.

How about trade based on currency strength? I have tried many indicators around that topic.
  • #20
  • Oct 23, 2016 12:13am Oct 23, 2016 12:13am
Quoting Samer1970
{image}
where I can get this indicator.
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