Weekly Volatility

[Thirteen]

hey guys i wonder if you can help?

a few months back a buddy was talking about how some use weekly volatility to tell where good exit points for a trade will be for intraday trading

does anyone know about this idea and how it works?

thx

 

[rog1111]

Thirteen

He was probably referring to the so called weekly "ATR" (average true range), volatility essentially. Get the weekly price ranges including price gaps, and work out the ATR, averaged over the last 10 weeks, say, then multiply this by a factor of 0.5, 1, 2 or 3 whatever (depending on how tight a stop you want ) times the ATR, then use this number as a non-reversing trailing stop behind the current intraday price at all times. The ATR will change as weeks go by, so you'll need to continually re-assess. That's how I would use volatility to find my intraday stops anyway.....

GL
rog1111

 

[BBB]

13,

I've never heard about this to be honest, but after a bit of thought, I wondered if this could work:

Weekly ATR gives an idea of the range for next week as Rog1111 says.

If we assume the low/high for the week has been printed, we can get an idea how far price could travel for the rest of the week. If this low/high pivot is broken, then the weeks range can be re-assessed using this new pivot as the low/high. This may allow us to estimate how far price may travel in the remainder of the week.

If the trend is down, then use the high of the week so far to predict how much further the trend may have left to go - ie predict the low.

e.g. It is Tuesday, and the weekly ATR is 5.6. If the trend for the week on an hourly chart is up, and the low so far is 24.7, then we could assume the high of the week may be somewhere around 30.3 (24.7 + 5.6). This may be able to help you plan the trade/project a probable and profitable target exit.

I doubt it would be that accurate, but could give a guideline or reference point.

Never tested this, never investigated this - just a quick thought, but may have some mileage.

What do others think?

 

[rog1111]

I've played around with this sort of thing for daily OHLC data, and it seems to work quite well. If anyone has some weekly bar data for me to play with, PM me first, then I'll run it through my backtester and post results on this thread. It might be interesting, although without tick data we'll have to make some best guesses (based on open & close ) about whether the weekly high or low was reached first.

rog1111

 

[Thirteen]

cheers guys

i think this is on the right track here as it rings a few bells now. he was saying if i remember right that he closes some contracts at the target (atr?) and lets the rest ride.

 

[rog1111]

Profit targets are often based on a factor x max initial risk ie (entry price - stop price) for Longs, so he might have set a profit target of 2 x IR. If the initial stop was set at 2 x ATR, then the initial target in this case would have been 4 x ATR. However ATR will change, so if you use this you'd have to decide whether to stick with your original target or change it too. Too complex for me & Id rather set a target based on a factor x IR, and move my stops if still in the trade.

GL
rog1111