Traders' Tips from TASC Magazine

The Truth about Volatility

Jim Berg’s article, "The Truth about Volatility," published in the February 2005 issue, introduces a volatility based trading system. The system includes indicators, a system test and an Expert Advisor. Below are the instructions to reproduce these formulas in MetaStock.

The indicators can be created with the following steps:

  1. In the Tools menu, select Indicator Builder.
  2. Click New to open the Indicator Editor.
  3. Type the name "volatility trailing stop indicator".
  4. Click in the large window and type in the formula:

    HHV(C-(2*ATR(10)),15)

  5. Click OK to close the editor

Repeat the steps for the second indicator:

  1. Select Tools > Indicator Builder
  2. Click New to open the Indicator Editor.
  3. Type the name "volatility profit indicator".
  4. Click in the large window and type in the formula:

    Mov(H,13,E)+(2*ATR(10))

  5. Click OK to close the editor

A system test for the volatility system can be created with the following steps:

  1. Select Tools > the Enhanced System Tester.
  2. Click New.
  3. Enter a name for the system.
  4. Select the Buy Order tab and enter the following formula:

    C > (LLV(L,20) + (2*ATR(10)))

  5. Select the Sell Order tab and enter the following formula:

    C < (LLV(L,20) + (2*ATR(10)))

  6. Click OK to close the editor

The expert advisor can be created with the following steps:

  1. Select Tools > Expert Advisor.
  2. Click New to open the Expert Editor.
  3. Type in the name "Volatility Entry".
  4. Click the Highlights tab.
  5. Click New to create a new highlight.
  6. Type in the name "Buy".
  7. Set the Color to "blue".
  8. Click in the condition window and type in the formula:

    C > (LLV(L,20) + (2*ATR(10)))

  9. Click OK to close the editor
  10. Click OK
  11. Click New to create a new highlight.
  12. Type in the name "Sell".
  13. Set the Color to "red".
  14. Click in the condition window and type in the formula:

    C < (HHV(H,20) - (2*ATR(10)))

  15. Click OK
  16. Click OK to close the Expert Editor.
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