Forex traders prefer markets with trends and high volatility. In order to maximize their profits, forex traders usually avoid trading in volatile markets in order to avoid losses. Technical indicators are popular among forex traders because they favor volatile and trending markets. These indicators are used when the market is trending and highly volatile. The Volatility Quality Indicator is one of the most useful technical indicators.
Basic Volatility Quality Indicator
The Volatility Quality Indicator uses the Average Percent of True Range (%ATR). This filter will remove trade signals that could be used to make better buys or sells, and determine the strength and direction of the trend.
Thomas Stridman, a stock technical analyst, created this indicator. It is a combination between two averages. The opening-high-low-closing values of the weighted moving average and the smoothed moving average to determine its value.
When bullish, the indicator turns green and then moves up as the uptrend continues.
When the market turns from bullish to bearish, the color of the volatility indicator changes from green to orange. As the downtrend continues, it gradually moves downward. This indicator is an important indicator for trend trading strategies.
How to trade with the Volatility Quality Indicator
This indicator can be used by range traders, breakout traders and trend traders.
The indicator can be used to enter or exit trades only, illustrated by an interval market. You can also use the indicator to confirm a trade when price is in a support or resistance zone.
The color of the volatility indicator changes from green to red. This can be seen in the arrow pointing upwards on the line of the Volatility Quality Indicator, as well as in the buy alert on the chart. When the price reaches a resistance point, the long position can be closed. The indicator color of the Volatility indicator will change from green to red.
When the price is above the resistance zone, you can sell or go short. At this point, the color of the Volatility indicator changes from green to red. This can be seen in the arrow pointing down on the VQ indicator line and in the sell alert on the chart. When the price reaches the support level, you can close the short position. The indicator color will change from red to green.
Conclusion
Volatility Quality Indicator has many benefits. This indicator should be used when there is high volatility in the market or in news trading. The indicator can be used for intraday, day, swing or daily trading in all time frames.
