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What volatility measure are you using ?


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What volatility measure are you using ?

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  #1 (permalink)
 syswizard 
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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.

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 LonnieMSP 
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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.

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 mtzimmer1 
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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.

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4autotrading
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syswizard View Post
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.

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.

Regards

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 bobwest 
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syswizard View Post
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.

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.

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 trendisyourfriend 
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mtzimmer1 View Post
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.

Can we find these values in Ninjatrader? implied volatility/Median daily range

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,

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 mtzimmer1 
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trendisyourfriend View Post
Can we find these values in Ninjatrader? implied volatility/Median daily range

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.

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 trendisyourfriend 
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mtzimmer1 View Post
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.

What is the current implied volatility for the ES?

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 mtzimmer1 
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trendisyourfriend View Post
What is the current implied volatility for the ES?

I've got .58 according to my platform.

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 f1p0pt10ns 
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LonnieMSP View Post
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.


bobwest View Post
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.

Can you guys help me understand what you mean by "short-term day trading"? I trade CL using a 60M for the "bigger picture", 20M for decision making and a renko chart for timing entries. I am okay holding anywhere from a few minutes to a few hours and target anywhere from 25 - 40 ticks per trade. I will not hold trade past the close of the current day so, is this still considered short-term? What period ATR period would be a good place to start for testing and measuring?

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 bobwest 
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f1p0pt10ns View Post
Can you guys help me understand what you mean by "short-term day trading"?

"Short term" pretty much means whatever the person using it means. It has no actual agreed-upon meaning.


Quoting 
I will not hold trade past the close of the current day so, is this still considered short-term?

I will not usually hold a trade much longer than 4 or 5 minutes. Long-term might be 10 or even 15 minutes. See what I mean? It's purely an individual matter.


Quoting 
What period ATR period would be a good place to start for testing and measuring?

ATR is relative to the bars you are using. I suggest plotting an ATR stop (most platforms have this as a built-in indicator) with different ATR multiples, on charts with different bars, and seeing what it gives you. There is no "right" answer: the stop is there to get you out before you get hurt too badly when you are wrong, and these are all individual decision factors that only you can make. Also, different market conditions may make you change -- with current volatility, what used to be safe may not be. But you have to experiment.

If your platform doesn't have an ATR stop, see if it has something like SuperTrend, which is also ATR-based, and fiddle with the settings. On SuperTrend, setting the ATR average to something fairly low so it mostly reflects recent bars, and the median period to 1, will get you the same as a regular ATR stop, for most formulations anyway. Then you just change the ATR multiple (how many ATR's you are willing to let price go against you before bailing out), and see how it goes. Or just use the defaults. (Don't use SuperTrend for entries, unless you enjoy getting whipsawed to death during choppy periods. Use it to exit a trend, and have something else for your entries.)

It's not all that critical, just have something and understand how it's working. You just want to have something to bail you out that doesn't depend on your personal assessment of the position while it's open and losing money, since your assessment is going to be not totally rational at that point. This assumes you want a trailing stop. But you might also use it to set an initial, non-moving stop if you prefer that. These are all decisions that you will make and that others will make differently, based on what seems best to the person doing the trading....

This is all a long way of saying I can't really answer your question. That's the nature of trading....

------------------

By the way, what's with the shouting with the huge font? There's nothing wrong with it, but it's kind of strange. Some people regard it as similar to shouting and it puts them off.

You'll likely be taken more seriously if you just use the normal font, and not bold either, except for occasional emphasis. Using a big font to emphasize everything just means that nothing is given any particular emphasis and it all just looks odd.

Not a criticism, just a tip.

Bob.

---------------

Edit: I also, as a matter of duty, should point out that the shorter-term a person trades, the more risky things generally get. This is simply because the faster things come at you, and require you to make important decisions, the more likely they will overwhelm you. So take into account the greater risks of shorter-term, however the term is meant.

Everything is an individual matter, but take care to manage your risk. For most traders, very rapid, short-term trading is just going to be riskier.

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 syswizard 
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bobwest View Post

ATR is relative to the bars you are using.

From a geek standpoint, the ATR calc has no value for short term trading..500 ticks, 2000 ticks, 1 minute, 5 minute.
Why ? There are no gaps in intraday data....none. Oh, except for the 4:30 pm re-open and 6:00 pm opening for the E-Minis.
This is important to understand. Average Range is equivalent. No need for the average "true" range. That applies mostly to daily bars.

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 bobwest 
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syswizard View Post
From a geek standpoint, the ATR calc has no value for short term trading..500 ticks, 2000 ticks, 1 minute, 5 minute.
Why ? There are no gaps in intraday data....none. Oh, except for the 4:30 pm re-open and 6:00 pm opening for the E-Minis.
This is important to understand. Average Range is equivalent. No need for the average "true" range. That applies mostly to daily bars.

Correct. The "true" range is actually always the same as the regular range, if there is no gap between bars, and there isn't except for daily bars.

There's also no downside to using "true" range, when it's something that your platform has as a built-in, and that's what I do. In fact, usually it's all that is offered. For example, most platforms will have an "ATR Stop," but probably not a non-ATR range stop. That's just how they do it.

Geek standpoints are good, by the way. Everyone should know the actual geek view, so they understand what's really going on.

Bob.

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 f1p0pt10ns 
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bobwest View Post
By the way, what's with the shouting with the huge font? There's nothing wrong with it, but it's kind of strange. Some people regard it as similar to shouting and it puts them off.

I suppose if I'm being honest, it is a personal preference and I never even look at it like that - furthermore, I am not use to participating in chat settings (as my stats indicate) so I am not well versed on the proper etiquette. Thank you for the advice I will do whatever is best to receive more thought provoking feedback.


bobwest View Post
It's not all that critical, just have something and understand how it's working. You just want to have something to bail you out that doesn't depend on your personal assessment of the position while it's open and losing money, since your assessment is going to be not totally rational at that point.

Bob, thank you for the vaguely detailed response. Should get me off and running. I am still on the sidelines but am going to begin logging some observations this evening. I suppose I feel like I am an intermediate trader and am always questioning whether I am using the proper charts for what I am expecting. WIP for sure. I am roughly 4.25 months into my reset so I am aware I have some ways to go. For me, this time around, it is a marathon. Looking forward to more of your tutelage!


bobwest View Post
Everything is an individual matter, but take care to manage your risk. For most traders, very rapid, short-term trading is just going to be riskier.

I have felt this 1st hand - I scalp traded for about 7 months and I could no longer take the stress of the risk. I have learned (through self exploration) I need to slow the markets down and give myself proper to time to analyze and make a decision in order to be comfortable during the trade.

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 bobwest 
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f1p0pt10ns View Post
Bob, thank you for the vaguely detailed response.



Yep, that's what it was.

Sometimes that's all that can be said. Everyone is truly different, and finds their own way, or at least we hope so.

Bob.

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 syswizard 
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LonnieMSP View Post
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.

Omigosh...this could go on forever.
In Short: Discretionary . The rest is a huge long term discussion.

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 LastDino 
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My basic trading strategy doesn't like too much volatility so I respect it and stay out of it, however when it is just above average volatility I use it to shift my stops and targets slightly away from my usual where everything is within expected bounds. Usually what is expected bounds for me is SD and ATR.

Also I usually trade under cover of sold strangles but due to high volatility touching options would have been very unwise move, especially selling (Which looks lucrative but trust me, it can destroy good accounts in matter of minutes), so I handled it by taking good holiday and going through some company performance sheets for last couple of years so I can pick up some stocks and expect some return on rebound and dividends in future.

I'm noob in trading world, so I count my chickens very carefully

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