Volatility, that is one of our biggest enemies in trading can be measured, which slightly makes our fated as traders easier. Using different measurements, we can say when the volatility is going to turn on itself and give us a good opportunity to trade a breakout.
Moving averages.
Moving average is a great tool that you can use to see an average movement of the asset in a certain period of time. You can apply it to any of the charts in order to understand whether the market has been volatile and when you are to expect a breakout.
Bollinger bands
Bollinger bands is the best tool that you can use for measuring volatility just because it was created to do so.
They are basically 2 lines that show 2 standard deviations above and below a moving average in a certain amount of time. You can for example use a +2 and -3 deviations.
When the two lines are getting closer we have a low volatility in the market.
When the two lines are getting further away from each other we have a high volatility in the market.
Average True Range or ATR.
ATR are designed to tell us the average trading range if the market for a certain amount of time.
When you see a falling ATR, that means that the volatility is getting lower.
When you see a rising ATR that means that the volatility is rising.
Comments powered by CComment