Determining Market Condition
Hello New Digital World,
When I refer to "market condition", I am talking about direction and volatility of the underlying.
Ways to determine direction:
1) Take the price change that occurs over a week and divide it by price. The resulting number(normalized) can then be compared to ranges that indicate bull, bear, neutral. OR
2) You can use a displaced moving average of the highs and lows but displaced forward. You would then compare the current price to this forward channel. Ie if the price is above channel than bullish, below channel bearish and in the middle channel neutral. OR
3) You can use 2 sets of simple moving averages. When both SMA’s faster MAs are above the slower, then bullish. When both pairs of MA’s fast lines are below the slow MAs, then bearish. If there is conflict between the 2 pairs of MA, than neutral.
Ways to determine volatility:
1) Take the ATR of the underlying and divide by price. Then use this number relative to ranges to determine volatile, quiet, normal for the underlying.
My question to the board is: does anyone have better or different ways to identify direction and volatility for an underling market?
Thanks,
Trading2013
1 Attachment(s)
With Forex Volatility So Low, How Might we Trade?
With Forex Volatility So Low, How Might we Trade?
- US Dollar trades at potentially important resistance, Euro at key support
- Forex volatility prices trade near record-lows, setting up for slow moves ahead
- We’re focusing on range trading opportunities in all except the JPY pairs
The US Dollar continues to stick to tight ranges versus the Euro, Japanese Yen, and other counterparts. How might we trade if forex volatility continues to drop?
Watch the video above and updated automated strategy outlook below. What happens when volatility inevitably surges?
http://youtu.be/Jw5rDaTWpo8
Attachment 6680
Definitions
Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.
Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near 90-day lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s 90-day range.
Range High – 90-day closing high.
Range Low – 90-day closing low.
Last – Current market price.
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Forex Market Directional and Volatility
Just a little explanation about market condition, its direction, trending or ranging and its volatility by using these standard indicators for determine its market condition.
Attachment 8100
(Example of EURUSD 1 hr chart)
Forex Indicator No.1: Bollinger Bands. The BB indicator is one of the most commonly used Forex indicators on a Forex chart. It consists of an upper and a lower band that envelope the candlesticks and it is through these bands that you tell the market volatility. When the Bollinger bands are squeezed together, the Forex market is moving in a low volatility. When they are far apart, the market is in a high volatility.
Forex indicator NO.2: Average True Range Indicator. The ATR indicator can be used to give you a gauge of the range of the market. Normally, it is set as 14 and depending on the time frame you are in. Usually the higher you see this indicator moves, the more volatile is the market and vise versa.
Forex Indicator No.3: ADX Indicator. It can also tell whether the market is trending or ranging. Whenever the market is trending, you can see this indicator pointing up and moving above the 25 level. If the market is ranging, this indicator will usually stay below the 25 level.
These three indicator are most commonly used by traders to measure market condition as well as market volatility. By knowing the volatility of the market we need to find out whether the market is trending or ranging so that we can decide on the type of trading strategy to use.
Weekly Forex Market Price Action Outlook – August 4th – 8th, 2014
Weekly Forex Market Price Action Outlook – August 4th – 8th, 2014
EURUSD – Euro/dollar downtrend intact
On Friday, the EURUSD found some buying interest finally, and made a run back up to the 8 day EMA dynamic resistance level. The trend is still down in this market, and our recent bearish bias has not changed; we are still looking to sell on a rally back to resistance. If the market moves back up to the 1.3480 – 1.3510 area, we will watch closely for a price action sell signal to trade back in-line with the downtrend.
http://www.learntotradethemarket.com.../eurusd152.png
GBPUSD – Sterling/dollar sell-off accelerates
The GBPUSD lost a lot of ground last week as bearish momentum took hold of the market. Our near-term bias on this market is now bearish and we will watch any rallies to resistance for sell signals. There’s some resistance coming in up near 1.7000, if the market retraces back to there we can watch for a sell signal. There’s also a key support / price action event area coming in down near 1.6690, and if the market falls down to that level in the coming days, we can watch for a price action buy signal as well, as that would be a high-probability area to look for buying opportunities.
http://www.learntotradethemarket.com.../gbpusd104.png
AUDUSD – Aussie/dollar still within confines of trading range
The AUDUSD did break down through support near 0.9320 last week, but it’s still confined within a large trading range between 0.9450 resistance and key support level down near 0.9200. If price continues falling and tests that key 0.9200 support, we will watch for price action buying opportunities from there, to trade back up toward the range resistance.
http://www.learntotradethemarket.com.../audusd154.png
NZDUSD – Kiwi/dollar showing signs of firming up near support
The NZDUSD found some buyers toward the end of last week as the market pushed slightly higher on Thursday and Friday. Price has fallen down close to the key support near 0.8400, but isn’t quite there yet. We could wait for a buy signal from that key 0.8400 support level or wait for the market to retrace higher and watch for a price action sell signal from resistance to trade back in-line with this recent bearish momentum.
http://www.learntotradethemarket.com...s/nzdusd39.png
S&P 500 – Bearish momentum pounds U.S. stocks
The S&P 500 has fallen significantly lower recently, following multiple failed attempts for the market to move higher. We can look to play both sides of the market at this point; watching for price action buy signals from key support and then looking for price action sell signals if the market pushes back up to key resistance levels.
http://www.learntotradethemarket.com...ads/sp500a.png