Best Volatility indicator for Dow ?

[rjay]

I am using a basic mechanical system to trade the Dow but it does not take into account the likelihood of the Dow breaking out into a profitable range ... in other words I cannot foresee whether the Dow will simply be moving sideways all day.

I was thinking that a Volatility indicator should help in this instance - do you agree ?? If so, which would be the best indicator to warn me of the likelihood of a breakout ?

 

[Trader333]

A difficult question to answer but probably the use of average true range (ATR) or some use of Bollinger bands.


Paul

 

[Paddington]

How about the VIX (implied volatility on S&P options)?

Chart of recent VIX activity here:

http://stockcharts.com/def/servlet/SC.web?c=$vix

looks like vol has been increasing over the last few days as the mkts have headed down form the recent peak

Pad

 

[Uncle]

I would agree with Trader it is difficult to answer, however try Commodity Selection Index which is a combination of ADXR and Average True Range, or Relative Volatility Index which measures the trend of the volatility.

John