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Trading the Volatility Bands for Amibroker (AFL)

2 / 5 (Votes 8)

You must have come across trading strategies based on Daily pivot and variations like the camarilla pivots.

Here is a strategy to trade on the statistical levels of volatility. The volatility values for a particular day are calculated. Based on these volatility values bands are calculated for different standard deviations 0.25, 0.5, 1.0, 1.28, 1.5, 2.0, 2.5

This is based on the assumption that volatility reverts to the mean and the price also seeks a equilibrium value. As per statistics the probability of the price being contained within a certain standard deviation band is as follow.

STDDEV PROBABILITY
1.00 – 68%
1.28 – 80%
1.50 – 88%
2.00 – 95%

You will observe that the prices tend to reverse at the extremes of these bands. The probability of a price reversal at the one standard deviation band is 68% and the probability of reversal at the 1.28 bands is 80% and so on. These probability bands provide a good method for intraday traders.

One can go long when the price crosses a particular band keeping the band value itself as a stop loss. When the price crosses the next band raise the stop loss thereby locking the profit. When the price stalls at a particular band unable to cross it is time to close your position and be ready to go on the reverse trade.

This strategy based on the volatility bands provides good high probability trades.

Here is a screenshot of how the indicator looks:
Volatility

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13 Comments

very nice!

very nice!

3. arm

NICE BUT TOO BUSY

4. panno

even after logging in formulas is not showing

Thanks

too good

7. chinmay

ANYBODY PLS TELL ME HOW TO GET THIS CODE, OR WHERE IS THE CODE
FORMULA IS NOT SHOWING
PLS HELP

I SUBMITTED 2 FORMULAS BEFORE FEW WEEKS BUT THEY NOT SEEM TO BE APPROVED YET. PLS .HELP

GOOD WORK

Good Work

11. rv2810

dear admin

i am more than happy to thank you for releasing this afl formula.
thks a lot for helping a newbie like me.

god bless

12. 22148715

SIR PLZ GIVE ME AFL FORMULA THIS CHART

good work

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