Introduction to the Volatility Indicator
“Where is the volatility?” This is often a question that traders ask when the market is not moving enough. This is because seasoned traders know that their opportunity to make money in trading is tied with volatility. The Volatility Indicator is a tool that traders can use to objectively identify markets with enough volatility to warrant a trading opportunity.
What is the Volatility Indicator?
The Volatility Indicator is a technical indicator which indicates how volatile or how fast the market is moving. It looks at how rapid price can change over a window of time or over a number of periods for a specific tradeable instrument. The faster the price movements, the higher the volatility it identifies, while slower price movements would result in a low volatility identified by the indicator.
This indicator plots a line which would oscillate up and down. However, unlike most oscillators which would indicate trend or momentum, this indicator simply indicates how volatile the market is.
How the Volatility Indicator Works?
This Volatility Indicator uses a complex formula which compares price movements based on the open, high, low, and close of price, while incorporating the variable of time and volume within its formula. It then plots its volatility line based on its underlying volatility formula.
This volatility line spikes up when it detects high volatility based on high volume trades with strong price movements and flattens out when the market is moving in a tight ranging manner.
How to use the Volatility Indicator for MT5
The Volatility Indicator has two simple variables which can be modified within its indicator’s Settings.
The “Channel Period” is the variable that is used to modify the number of periods that the indicator’s formula would compute for.
The “horizontal shift of the indicator in bars” variable allows traders to move the Volatility Indicator line forward or back.
The Volatility Indicator does not provide trade signals. It does not indicate whether the market is trending up or down, nor provide signals that the market is about to reverse. However, what it provides is a vital technical analysis indication as it gives traders a hint whether the market has enough price movement which could result in profits.
A low volatility market often means a tight ranging market. Most traders would avoid trading in such a market as the prospects of decent profits is often too low in such a market. Below is an example of a low volatility market with a tight ranging price action.
On some occasions, high volatility markets tend to result in sudden price spikes. Such price spikes can result in an overbought or oversold market, which could rapidly cause a quick reversal as a knee-jerk reaction of the market. Below is an example of a high volatility price spike which resulted in a quick reversal.
Inversely, in some cases, volatility spikes can also result in a continuation of a strong market momentum. As such, it is important to read price action as it would provide the possible trade direction in a high volatility market.
Conclusion
The Volatility Indicator is simply an additional layer of information which traders can use to help them decide whether the market is worth trading or if for the moment it is better to stay away from the market. It does not provide trade signals but it is still an important data to look at.
MT5 Indicators – Download Instructions
Volatility Indicator for MT5 is a Metatrader 5 (MT5) indicator and the essence of this technical indicator is to transform the accumulated history data.
Volatility Indicator for MT5 provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust their strategy accordingly. Click here for MT5 Strategies
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How to install Volatility Indicator for MT5.mq5 to your MetaTrader 5 Chart?
- Download Volatility Indicator for MT5.mq5
- Copy Volatility Indicator for MT5.mq5 to your Metatrader 5 Directory / experts / indicators /
- Start or restart your Metatrader 5 Client
- Select Chart and Timeframe where you want to test your mt5 indicator
- Search “Custom Indicators” in your Navigator mostly left in your Metatrader 5 Client
- Right click on Volatility Indicator for MT5.mq5
- Attach to a chart
- Modify settings or press ok
- Indicator Volatility Indicator for MT5.mq4 is available on your Chart
How to remove Volatility Indicator for MT5.mq5 from your Metatrader 5 Chart?
- Select the Chart where is the Indicator running in your Metatrader 5 Client
- Right click into the Chart
- “Indicators list”
- Select the Indicator and delete
Volatility Indicator for MT5 (Free Download)
Click here below to download: