The Volatility indicator can be used as an indicator for trend trading or as an indicator for volatility. It indicates the direction of the price by using two colors: green and red. The green line indicates that the market is trending up and the red line indicates that the market is trending down. As far as its volatility function is concerned, the farther the line is from the zero line, the more volatility within the market is indicated.
However, the volatility indicator differs from the original indicator in its insensitivity. It does not give more signals than the original indicator, and because of this, it is less prone to false breakouts. It uses the analysis of the opening high low closing value of the weighted moving average to determine its value. But on the other hand, indicators of market volatility do not always react quickly to price changes.
How to use the volatility indicator
The best way to use this indicator for Forex trading is to observe the indicator. As soon as the line turns from green to red, you should go long …
These signals occur when the line crosses the zero line.
Trade management using this indicator
Trading with the Volatility indicator is only one part of the puzzle. The second part involves understanding the best way to establish stops and profits using this indicator.
In order to establish profit levels with the indicator, it is important to close trades when there is a new signal. For example, if the indicator for a volatility trade changes from red to green, then exit any long positions. If the indicator changes from green to red, close any short positions.
The best way to determine a stop loss limit is to record the latest high or low before the volatility indicator signal. For example, you can note the highest price since the indicator switched from bearish to bullish and then place your stop loss on it. This approach can be based on the concept that in order for a downtrend to occur in a financial instrument market, there must be higher lows, lower levels and fewer highs. In order for an uptrend to occur, there must be higher highs as well as higher lows.
You can also use this method to set your stop loss to eliminate trades. If you notice that the last high or low is far away from where the current signal is, this may be a warning to avoid the trade. The reason for this may be that the market may have lost its momentum before you have gained enough pips from the trade.
The Volatility indicator is the best choice for anyone who trades Forex. It is easy to use and does not require any technical skills before you can apply this indicator to your trading.