Using Range Volatility Signals to Guide Stops and Targets

Summary

The CDRVolatility indicator compares the largest upward and downward price moves within a user-selected window. Which move is treated as convergent or divergent depends on whether price’s net change over that window is positive or negative. The indicator is presented as a guide for stop-loss, take-profit, and trailing-stop decisions. The divergent move can indicate a lower bound for stop distance, while the convergent move helps estimate a target and the range of volatility.

Users set the window length, a minimum open-to-close price-change threshold, and an averaging period. The document recommends choosing a threshold usually reached during the selected timeframe and names hourly, four-hour, and daily charts as suitable. It gives a four-hour example using a 12-bar window, a 20-period simple moving average, and a threshold of 20 pips or less. It offers no backtest results or detailed entry rules, so the indicator’s claimed usefulness as a performance guide is not supported by reported evidence.

Key ideas

• The indicator identifies the largest upswing and downswing within a chosen window.
• The net price change determines which move is labeled convergent and which is divergent.
• The divergent signal is proposed as a guide to minimum stop distance, while the convergent signal informs take-profit planning.
• Users can adjust the window, movement threshold, and averaging period.
• The document provides suggested settings but no performance evaluation or complete trading rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.