O'Reilly logo

Gold Trading Boot Camp: How to Master the Basics and Become a Successful Commodities Investor by Gregory T. Weldon

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 21
Historic Volatility and Volatility Bands
Reading volatility is yet another subjective exercise.
There are two primary ways I look at volatility:
1. I observe volatility from a historic perspective.
2. I look at volatility for the application of bands to intraday charts, for use as a timing mechanism, and for the definition of short-term pivot points.
Looking at historic volatility, the intent is to learn something about the trending characteristics, or lack thereof, exhibited by a market. I do this by comparing historic volatilities over multiple time frames.
A market where the 21-day volatility is rising and is higher than the 50-day volatility that is also rising, and has just moved above the 100-day measure would be signaling an acceleration in whatever direction it was moving.
The subjective nature extends from the fact that a volatility alignment such as the one just described could define either a significant trend reversal in the making, following a prolonged low-volatility trend or a fresh breakout and newborn trend in the making, extending from a sideways, nontrending market.
In the first case, I might look to employ some countertrend techniques on a low risk, shorter-term speculative basis. Or, as an investor, I might seek to tighten my stop-order protection. This would most likely occur where giveback is intensifying, in terms of holding what is still a longer-term profitable investment, but where the reversal is accelerating and causing pain.
In the second ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required