Lockdown time gives us the opportunity to dust up some old stuff and cleanup. Some people found the time to look at some of my old work and shown some interest in them. One such work is the Volatility Trading system for Intraday. This is simple trading system based on bands based on volatility where these bands are used as entry points and trailing stops. A brief explanation of the system is as below.
Because the volatility of a stock is its standard deviation, we can statistically establish “confidence Intervals” of the price moves. In statistics, a one standard deviation range means that there is a 68-
percent likelihood the stock price will stay within the range (a 67-percent confidence interval). The confidence value for different standard deviations are
1.00 - 68%
1.28 - 80%
1.50 - 88%
2.00 - 95%
So, we draw bands at various standard deviation levels like 0.25, 0.5, 1, 1.28, 1.65 and 2 from the previous day’s close. Entry is made once the price cross above a Band and the same band because the stop loss. When the price crosses above the next band the stop loss is shifted to this band value. This point can be also a “ADD ON” point. In the same way trading can be done on the down side as well.
The formula for calculating the bands is as follows
S * M * V * (n/252)
S = stock price
M = number of standard deviations
V = volatility
N= number of days
When I released this system years back the Volatility value to be used in the formula was made available in my website. Unfortunately, I could not continue with the web site. Now I am releasing the new afl which can be used independently. The Volatility used in the formula can be Historical volatility or implied volatility. The current formula uses the VIX values of the previous day which is available from NSE web site. The High Value of the VIX is used for the higher Bands and the Low value of the VIX is use for the lower Bands. This is Intraday Trading system only. The system is ideally suited for the Index as it is based on the VIX. Soon I will provide a version for stocks which will be based on the Historical volatility of the stock itself.
I had posted a video also on the system which is still relevant. https://youtu.be/Mj5oTrvOqIQ
The AFL can be downloaded from the below link
Nice to see you again sirReplyDelete
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Do you provide training for amibroker or algo strategies?
fantastic sir ended up following you here as well from youtube...have begun ami learning and I must say lucky to have legends like You and Rajenderan around.ReplyDelete
I am Universal Investment Strategies. Very informative post! I am thankful to you for providing this unique information.
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Sir, can we get code for Trading View?ReplyDelete
Sir, can i get code for Trading ViewDelete
Entry and exit only arrow mark high and low or sl is band value?ReplyDelete
if possible recent day entry exit details kindly explain sir
thanks for giving this sir
SELL SIDE NOT EXPLAINED IN VIDEO SO LET ME KNOW THIS SIR?Delete
Thank you for sharing such valuable and helpful information and knowledge. You have some quality information here that any reader would enjoy Keep it up. I would love to see your next update.Day Trading Tips| Intraday Trading Tips
Namasthe Sir, First I'd like to appreciate your work and the way you share your knowledge without any monetary benefit. A small doubt regarding the formula you posted here is that - S+M*V*(n/252) or S*M*V*(n/252).ReplyDelete
I also tried to look at your afl file sir. there I find a formula - vfh=(vixh*0.0523421)/100, What is this 0.0523421 sir. How did we get that number.
This is just out of curiosity nothing more than that sir. Please let me know sir.