Using Volatility and Price Amplitude to Screen Markets and Set Stops

Summary

The document describes an indicator that estimates volatility, directional price amplitude, and the difference between them. It builds range-based trend levels, counts price behavior relative to a trend line, and uses those counts to set a lookback period for measuring amplitude. A positive amplitude-minus-volatility reading is presented as a more active market condition; a negative reading is treated as stagnation and a reason to avoid trading. When comparing several markets, the author suggests favoring those with stronger readings.

Volatility is also offered as information for setting stop-loss protection, while amplitude helps describe recent movement. The document provides indicator code but no backtest, performance evidence, or guidance for calibrating its lookback and thresholds. Its interpretation should therefore be treated as a screening heuristic rather than a validated trading rule. Forex users must enable a separate setting so volatility and amplitude are scaled for currency prices.

Key ideas

• The indicator compares measured price amplitude with a range-based volatility estimate.
• A negative difference is interpreted as stagnation and a possible reason to stay out of the market.
• The author proposes comparing readings across markets when choosing where to trade.
• Volatility can inform stop-loss placement, while amplitude describes recent price movement.
• The document supplies no performance tests or parameter validation.

Tags

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