How to trade intraday using Volatiltiy

radha55

Well-Known Member
#1
This is extract copied from one of the books
https://sites.google.com/site/intradayautomatedsoftware/How%20to%20trade%20intraday%20using%20Advanced%20Volatility%20Calculator.pdf?attredirects=0&d=1

In any stock market, the prices of any underlying are subject to change based on various market
parameters. These parameters may be related to a specific trading instrument, country of its origin, international
news, and political news, financial growth of company and/or investors sentiment. As a retail intraday trader, it is
difficult to analyze all of these aspects during trading. Practically, if we try to follow and analyze all these
parameters, we would just be spending all our time analyzing these parameters and would hardly get time to
trade.
We need to be practical while doing intraday trading and we need to very quick while taking decisions
during intraday trading. Considering all these scenarios and taking into account the practical approach, I have
designed a very simple trading strategy to trade in any stock market without following/analyzing any of these
market parameters but still taking care of all these parameters indirectly. This is basically called smart trading
rather than hard work/laborious trading.
Many big firms pay heavily to hire research analyst to analyze their trading instruments on various such
parameters. They can afford to do so because they have huge capital and high net worth investors to invest in.
But as a retail investor, you practically cannot hire an expensive research analyst for all your trades. So, let’s think
in more practical and smart way to trade in any stock market.
Let me first tell you a little about this system which I have designed to trade in intraday. Practically, we all
know that Markets are driven by various parameters and based on these parameters, the prices of the underlying
varies a lot. In other words, I would say the underlying is volatile to various market parameters and sentiments.
So now here comes the word “Volatility” on which I concentrate for intraday trading.
To trade based on any strategy; you first need to know about the calculations involved in that strategy.
Here we are talking about trading using Volatility, so we need to know what volatility is and how is it calculated?


What is Volatility?
In finance, volatility is a measure for variation of price of a financial instrument over time.

I won’t be disclosing the formula for this or how is it calculated, but keep reading to know how you can trade
based on this system.
Softwares to calculate Volatility
In above definition, time can be of any time range. The longer the time range the better would be
accuracy of calculation. For sake of simplicity and practical use, we take into consideration just one week period
or last 5 days prices to calculate volatility.
We are not taking more than 5 days, because it would be time consuming to get the data for long time
frames and then entering those data manually in a calculator for each instrument.
However, there is real-time volatility software as well which takes data of longer time frame from live
feeds to calculate more precise levels in less time. Below are those 2 versions of Advanced Volatility Calculator.
1. Advanced Volatility – Takes last 5 days data to calculate levels and recommendation.
2. Realtime Advanced Volatility – Automatically takes more than a month’s data from live feeds to calculate
levels.
Saying all that below are the links to download both these calculators (remember they are paid ones, but you
get them as a free trial for a weeks’ time.)
1. Advanced Volatility Calculator - http://www.pivottrading.net/advancedVolatility.php
2. Realtime Volaitlity Calculator - http://www.pivottrading.co.in/realtimeAdvancedVolatility.php
 

radha55

Well-Known Member
#2
How to practically trade using Advanced Volatility Calculator?
Let’s trade in Nifty Futures (25SEP2014 contract) using Advanced Volatility Calculator.
Example 1: Trade for 23rd Sep 2014 in Nifty Futures.
Step 1: Find the last 5 days closing price for Nifty Future (25Sep2014 contract)



Step 2: Enter these values in calculator.
See the blue colour box which shows last 5 days closing price. We put these prices in Advanced Volatility
Calculator and get the below recommendations.



As you can see the previous day closing price goes in text field “Day1”, and previous-to-previous day’s closing
price in text field “Day2”, and so on.
For now, just assume LTP/WAP/Open = 8148.10. I would tell in sometime what this value is & how to select
this value.
Below is the intraday chart of Nifty Future 25Sep2014 contract.



As you can see in the chart, as soon as the sell triggered, first target was 8.123.3 and it hit a low of 8.123.10.
Did you see the accuracy of the levels generated by Advanced Volatility here. It just touched the low and
reversed for sometime.
Later after few hours, target 2 was hit and then it was a free fall to hit target 3 and target 4.
What is Open/WAP/LTP?
There is lot of confusion which people faces when they want to put value in this text field. Let me first explain
what each short forms mentioned here mean.
Open: Open price of any underlying.
WAP: Weighted Average Price of underlying. (This is also called the average price of underlying. Almost all the
trading terminal will provide you with the average price of underlying. Ask your broker or refer help manual
of your trading terminal to learn this.)
LTP: Last Traded Price of underlying
How to select Open/WAP/LTP? What to enter when?
1. Open price / WAP (average price) should be used during the first 30 minutes of market opening. So if
market opens at 9:15 am, you should use Open/WAP value till 9:45 am and calculate the levels of
underlying. (In fact this is also the ideal way of calculating levels for any underlying). The early you
calculate levels in a day, the more time you get to do intraday trading.
2. If for some reason, you could not use the calculator in first 30 min of market opening, you can still use the
calculator anytime during the day as well. But after first 30 minutes, you should take the LTP of underlying
instead of Open/WAP.
3. The other option is to use the closing price of previous 30 min candle in 30 min intraday chart. (If you
don’t know, how to view 30 min intraday chart, please ignore this or look at the image below to learn.
You can check with your broker how to view a 30 min chart in your trading terminal)



b. Look at all the red markings in above chart.
c. Let’s say, if you want to start trading at 1:30 pm, in that case, you will take the previous 30 min
candle (marked in circle here) and take its closing price, which in this case is 8087.90.
d. Below is the revised calculation sheet using LTP method at 1:30 pm.



As you can see now, the levels of buy and sell have changed. Now sell should be done below
8060.
 
#3
How to practically trade using Advanced Volatility Calculator?
Let’s trade in Nifty Futures (25SEP2014 contract) using Advanced Volatility Calculator.
Example 1: Trade for 23rd Sep 2014 in Nifty Futures.
Step 1: Find the last 5 days closing price for Nifty Future (25Sep2014 contract)



Step 2: Enter these values in calculator.
See the blue colour box which shows last 5 days closing price. We put these prices in Advanced Volatility
Calculator and get the below recommendations.



As you can see the previous day closing price goes in text field “Day1”, and previous-to-previous day’s closing
price in text field “Day2”, and so on.
For now, just assume LTP/WAP/Open = 8148.10. I would tell in sometime what this value is & how to select
this value.
Below is the intraday chart of Nifty Future 25Sep2014 contract.



As you can see in the chart, as soon as the sell triggered, first target was 8.123.3 and it hit a low of 8.123.10.
Did you see the accuracy of the levels generated by Advanced Volatility here. It just touched the low and
reversed for sometime.
Later after few hours, target 2 was hit and then it was a free fall to hit target 3 and target 4.
What is Open/WAP/LTP?
There is lot of confusion which people faces when they want to put value in this text field. Let me first explain
what each short forms mentioned here mean.
Open: Open price of any underlying.
WAP: Weighted Average Price of underlying. (This is also called the average price of underlying. Almost all the
trading terminal will provide you with the average price of underlying. Ask your broker or refer help manual
of your trading terminal to learn this.)
LTP: Last Traded Price of underlying
How to select Open/WAP/LTP? What to enter when?
1. Open price / WAP (average price) should be used during the first 30 minutes of market opening. So if
market opens at 9:15 am, you should use Open/WAP value till 9:45 am and calculate the levels of
underlying. (In fact this is also the ideal way of calculating levels for any underlying). The early you
calculate levels in a day, the more time you get to do intraday trading.
2. If for some reason, you could not use the calculator in first 30 min of market opening, you can still use the
calculator anytime during the day as well. But after first 30 minutes, you should take the LTP of underlying
instead of Open/WAP.
3. The other option is to use the closing price of previous 30 min candle in 30 min intraday chart. (If you
don’t know, how to view 30 min intraday chart, please ignore this or look at the image below to learn.
You can check with your broker how to view a 30 min chart in your trading terminal)



b. Look at all the red markings in above chart.
c. Let’s say, if you want to start trading at 1:30 pm, in that case, you will take the previous 30 min
candle (marked in circle here) and take its closing price, which in this case is 8087.90.
d. Below is the revised calculation sheet using LTP method at 1:30 pm.



As you can see now, the levels of buy and sell have changed. Now sell should be done below
8060.
Thanks Radha! I'm new to this forum and just going through this thread.
Want to know what is the success ratio for this strategy? Also compared to other strategies like Camarilla, Pivots where does this strategy stand??
 

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