Tag: volatility indicators

Trading with Donchian Channels

Trading with Donchian Channels

Trading Indicators
The Donchian channels, also referred to as Donchian Bands, is one of the famous channel indicators besides the more popular Bollinger Bands. It is a trend following channel indicator and has given rise to many different trading strategies including the famed 'Turtle Trading Strategy' as well. The Donchian Band is primarily used to gauge the volatility of the markets (similar to Bollinger Bands) and can also be used as a break out indicator as well as a horizontal support and resistance indicator. This means that when prices are stable, the Donchian channels tend to contract or narrow and when volatility picks up, the Donchian channels widen. The Donchian Channel was developed by Richard Donchian a futures and commodities trader. Richard Donchian is also known within the trading f
What is the Standard Deviation Channel

What is the Standard Deviation Channel

Trading Indicators
Standard deviation channel is also alternatively referred to as the Linear Regression channel. In the course of this article, we will use both the words as they mean the same. As the name implies, the Standard deviation is a channel with an upper and lower range which are placed 'x' standard deviations away. The Standard deviation channel operates on the concept of reversal to the mean or price equilibrium. When it comes to plotting the standard deviation channel, traders must specify the time frame, or the number of bars for which they want the deviation channel to be plotted. Based on this input, if a trader selects 100 bars, then the standard deviation channel is automatically plotted. Ideally, the Standard deviation channel is used to find market tops and bottoms for the specifie...
Using the Envelopes Indicator for Trading

Using the Envelopes Indicator for Trading

Trading Indicators
The envelopes indicator is a rather unique trading indicator. Unlike most trend following indicators such as moving averages, the envelopes indicator follows the mean reversion concept. The mean reversion is based on the principle that prices tend to revert to the mean when they deviate too far away. As such, the envelopes indicator provides traders a different way to trade the underlying markets. The envelopes indicator is comprised of 3 bands, namely a moving average and an upper and lower band. The outer bands are placed at a fixed percentage away from the moving average. How are Envelopes Indicator Calculated The envelopes indicator comprises of a band and a mean. The mean is usually an exponential moving average for a period that the trader can specify, while the upper and ...
Introduction to Average True Range

Introduction to Average True Range

Trading Indicators
ATR for short, the Average True Range is a technical analysis indicator used to measure volatility in the markets. Developed by J. Welles Welder, the ATR forms an important element in the larger trading systems. Besides ATR, J. Welles Welder is also attributed to other indicators such as the Average Directional index, Relative Strength Index and Parabolic SAR. Unlike other indicators, the ATR works in the opposite way. Meaning that when the market is at a low, the ATR usually peaks and vice-versa. When trading with the ATR indicator, the higher the value of the ATR, the greater the trend change is probable and conversely, lower the ATR value, the weaker is the trend. The ATR is not to be mistaken for price trend, but rather price volatility. And you might know that volatility rep...
Trading with Bollinger Bands <sup>®</sup>

Trading with Bollinger Bands ®

Trading Indicators
Developed by John Bollinger in the 1980's, Bollinger Bands® is a technical analysis tool which comprises of two price channels (upper and lower bands) plotted two standard deviations (used to measure volatility) away from a moving average (the median line). Despite a decade since Bollinger bands was developed, it is still widely used amongst traders and market technicians to identify volatility and trends in the markets and can be used across different time frames. Bollinger Bands® are part of the standard technical analysis tools available by default and for free in most trading platforms. Also referred to as Bands, this technical analysis tool is used across various markets including Forex, Stocks and commodities. In this article, we'll take a look at Bollinger Bands® and how to imple