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NinjaTrader Formulas

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Within the Volatility band

One of the indicator rules for my swing trading strategy (IRSTS) is to catch potential reversal points using the upper and lower boundaries of volatility bands. In this article, I will show you how to create volatility bands and use them to make buy & sell decisions. Measuring volatility There are many ways to measure price volatility; one of the common ways is to use the average true range (ATR), originally developed by J. Welles Wilder and introduced in his book New Concepts In Technical Trading Systems. The true range indicator is the greatest of the following: The current high less the current low. The absolute value of the current high less the previous close. The absolute value of the current low less the previous close.

Simply put, a stock experiencing a high level of volatility will have a higher ATR, and a low volatility stock will have a lower ATR. Personally, I prefer to smooth results right from the first data manipulation, which is why instead of using the closing price, I start with typical data, which is the high + low + close divided by three. When the typical price of today is greater than or equal to yesterday's typical price, I will then use the typical price of today minus the low price of yesterday. When the typical price of today is less than yesterday's typical price, I will use the difference between the typical price of yesterday minus the low price of today. By default, I smooth this data by summing a 13-day period.

A full description can be found in the Stocks & Commodities August 2013 publication. You can download the NinjaScript ZIP file below.

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Volatility band


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Download the basic NinjaScript formula for this volatility band:



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Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

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