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There are algos like Historic Volatility and then there are simple algos like Highest High minus Lowest Low over a period of time. Finally, there is the VIX index.
Which does everyone use to help set their stop loss points ? With recent volatility, fixed stops have been getting decimated IMHO.
What kind of trader are you (discretionary, systematic)? What is your time horizon (minutes, hours, months)? I'm a short term day trader of futures. It has been helpful for me to look at Average Daily Range and Average True Range when looking for realistic targets and potential moves. It may be worthwhile to consider range type indicators instead of using the often misunderstood VIX; far too many people equate volatility with the VIX and vice versa.
My systematic trading does not use stops but I determine position sizing based off of the expected move over the period of days equal to my average trade duration, which in my case is 9 trading days. Expected move is calculated by the implied volatility. Median daily range is also a fairly good metric for forecasting future volatility.
The kind of volatility that we are seeing in the current market situation, no matter what kind of fixed stops one uses, they will get hit! Trading without the stops could also prove out to be extremely risky. So it is really tough to figure out, which method to use for stop placements in such volatile trading environment.
I typically rely on a multiple of ATR (average true range), which I have decided on just by experimentation (1.5 x ATR, which is a pretty tight stop.) This is for discretionary day trading with a fairly short-term time horizon.
With the current volatility, I also am relying on SOH (sitting on hands), and staying out of the meat grinder.
There will be many opportunities to trade, once the risk is less insane.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I have looked at the implied volatility formula on the net. Looks complex for the job at hand. What is the current implied volatility for the ES? From what i understand the implied volatility is related to the option markets,
I don't know if they are in Ninjatrader, I use a different platform. VIX is calculated from the options market as well. Implied volatility overstates realized volatility but is still a pretty good predictor in my opinion and experience.
