often refers to the amount of uncertainty or risk related to the size of changes in a security's value. The higher the , the riskier the security - the price of the security can change dramatically over a short time period in either direction. A lower - security's value does not fluctuate dramatically, and tends to be more steady
This study, Volatility Bands, attempts to present a way to measure and visualize volatility, using standard deviations (σ) and indicator, and aims to point out areas that might indicate potential trading opportunities
I will try to explain the usage with examples,
same setup with different option selected
as you may observe from the examples different setting may have advantages and disadvantages over one another, it is recommended to verify a trading setup with different available options.
Additionally, It is recommended to use this indicator in conjunction with other technical indicators, or verify using chart/candle patterns. Below is an usage example using in conjunction with other indicator, in the given example “Neglected by DGT” is selected
Similarities and Differences
Bollinger Bands depicts two standard deviations above and below a , and Keltner Channel depicts two times (ATR) above and below an
Volatility Bands study combines the approach of both and Channel, with different settings and different visualization
Default settings are one standard deviations and one time (ATR) above and below 13 period . Setting can be adjusted by users but let me remind all testes are performed with the default settings.
Mathematically expressed as
Upper band area between “ema + stdev” and “ema + atr”
Lower band area between “ema – stdev” and “ema – atr”
A different display is added with the inspiration I get from one of the @quantgym ‘s study, many thanks @quantgym 😉
When difference band display is selected the study will reflect the area between “ema + stdev – atr” and “ema – stdev + atr”. As shown in the examples above
Note: standard deviation calculation can be adjusted based on price action or its moving average.
Other differentiation between BB and KC is with V-BANDS mostly we look for trade opportunities when price action move out of the bands and in most cases we assume market is consolidating when the price action is within the bands
The other indicator that presents similarities to Volatility Bands is Squeeze Indicator, which measures the relationship between and Keltner's Channels to help identify consolidations and signal when prices are likely to break out. Mainly Bands is different version of Squeeze indicator, in fact the purpose is almost same but visualization is completely different. Additionally Bands Offers trading opportunities whereas Squeeze indicator only presents market states unless a is adapted to Squeeze indicator.
Trading success is all about following your trading strategy and the indicators should fit within your trading strategy, and not to be traded upon solely
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for details of Logistic EMA you are invited to check "Logistic EMA w/ Signals by DGT" study
color of standard deviation line differentiated from atr line
- ability to view atr and stdev changes independetly
- ability to identify squeeze regions clearly
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