{"id":9727,"date":"2022-10-12T20:45:51","date_gmt":"2022-10-12T20:45:51","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9727"},"modified":"2022-10-12T20:45:51","modified_gmt":"2022-10-12T20:45:51","slug":"how-to-measure-volatility","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/12\/how-to-measure-volatility\/","title":{"rendered":"How to Measure Volatility"},"content":{"rendered":"\n

Volatility<\/strong> is something that we can use when looking for good breakout trade opportunities.<\/p>\n\n\n\n

Volatility measures the overall price fluctuations over a certain time and this information can be used to detect potential breakouts.<\/p>\n\n\n\n

There are a few indicators that can help you gauge a pair\u2019s current volatility.<\/p>\n\n\n\n

Using these indicators can help you tremendously when looking for breakout opportunities.<\/p>\n\n\n\n

1. Moving Average<\/h2>\n\n\n\n

Moving averages<\/strong> are probably the most common indicator used by forex traders and although it is a simple tool, it provides invaluable data.<\/p>\n\n\n\n

Simply put, moving averages measures the average movement of the market for an X amount of time, where X is whatever you want it to be.<\/p>\n\n\n\n

For example, if you applied a 20 SMA<\/strong> to a daily chart, it would show you the average movement for the past 20 days.<\/p>\n\n\n\n

There are other types of moving averages such as exponential and weighted, but for the purpose of this lesson, we won\u2019t go too much into detail on them.<\/p>\n\n\n\n

For more information on moving averages or if you just need to refresh yourself on them, check out our lesson on\u00a0moving averages.<\/p>\n\n\n\n

\"Use<\/a><\/figure>\n\n\n\n

2. Bollinger Bands<\/h2>\n\n\n\n

Bollinger Bands<\/strong> are excellent tools for measuring volatility because that is exactly what it was designed to do.<\/p>\n\n\n\n

Bollinger Bands\u00a0are basically 2 lines that are plotted 2 standard deviations above and below a moving average for an X amount of time, where X is whatever you want it to be.<\/p>\n\n\n\n

So if we set it at 20, we would have a 20 SMA and two other lines.<\/p>\n\n\n\n

One line would be plotted +2 standard deviations above it and the other line would be plotted -2 standard deviations below.<\/p>\n\n\n\n

When the bands contract<\/strong>, it tells us that volatility is LOW.<\/p>\n\n\n\n

When the bands widen<\/strong>, it tells us that volatility is HIGH.<\/p>\n\n\n\n

For a more thorough explanation, check out our\u00a0Bollinger Bands\u00a0lesson.<\/p>\n\n\n\n

\"Use<\/a><\/figure>\n\n\n\n

3. Average True Range (ATR)<\/h2>\n\n\n\n

Last on the list is the Average True Range<\/strong>, also known as ATR.<\/p>\n\n\n\n

The\u00a0ATR\u00a0is an excellent tool for measuring volatility because it tells us the average trading range of the market for X amount of time, where X is whatever you want it to be.<\/p>\n\n\n\n

Basically, ATR takes the currency pair\u2019s range<\/strong>, which is the distance between the high and low in the time frame under study, and then plots that measurement as a moving average<\/p>\n\n\n\n

So if you set ATR to \u201c20<\/strong>\u201d on a daily chart, it would show you the average trading range for the past 20 days<\/strong>.<\/p>\n\n\n\n

\"Use<\/a><\/figure>\n\n\n\n

When ATR is falling<\/strong>, it is an indication that volatility is decreasing.<\/p>\n\n\n\n

When ATR is rising,<\/strong> it is an indication that volatility has been on the rise.<\/p>\n\n\n\n

Just remember that that ATR is a volatility indicator<\/strong>, NOT a directional indicator.<\/p>\n\n\n\n

It\u2019s s best used as a technical indicator to help confirm the market\u2019s enthusiasm (or lack of) for\u00a0range\u00a0breakouts.<\/p>\n\n\n\n

To learn more about ATR, check out our Forepedia page on ATR.<\/p>\n","protected":false},"excerpt":{"rendered":"

Volatility is something that we can use when looking for good breakout trade opportunities. Volatility measures the overall price fluctuations over a certain time and this information can be used to detect potential breakouts. There are a few indicators that can help you gauge a pair\u2019s current volatility. Using these indicators can help you tremendously when […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[845],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9727"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9727"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9727\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}