Intraday trading strategy using volatility on 2 different timeframes

Since we want to be on the correct side of price, we often rely on different kind of indicators that tell us what were, because of their calculation method made of past data, and not what is at the exact moment we have to decide if the informations they give is still effective.

Because of our emotions, because we are humans and not robots, we are in need to be advised and be securized by the best informations we can receive and whenever we want. I don’t say that indicators are useless things, i am only pointing the fact that even if we are sure of them, we are still not sure of us…

This is something i am constantly work on : best information at the right time, erase emotions, enter market, take profit or loss, go ahead. Because i prefer doing research on intraday data and as far as i am in this exploration, i would like to expose a simple but effective way of entering the market the way i supposing is a good compromise between the constant need of other informations to be sure of, and the trading decisions made by previous informations underlying of lagging indicators.

I will not here talking about money management methods that will give you an hedge on what you are doing in trading, right or wrong. That is not the subject, it is another vast debate we’ll have in other posts of the site..I’m pretty sure we will 🙂

Where to begin to look about market volatility ?

Firstly, we have to identify an extreme volatile day on any kind of instrument’s lists you wish or you usually trade. To achieve this, we find that ProRealTime screener will certainly do perfectly the job.

For filtering the instruments to find that we are on a daily high volatility, let’s get use of an indicator that you’ll find in the library : “Volatility scalper indicator” :

This indicator uses Average True Range to reflect the absolute variation of the current candle, it is a good measurement of what happen on the current bar.

Because we want it to be universal over any instruments that it will scan, i adapted it to reflect percentage variation instead of point/pips. Here is the updated code :

You’ll find this newly version attached at the end of the current article.

Now that we know we are on a day where things happen, we still need to know that if we are still in the right “time” to catch trading opportunities. I think that you are already understand that we will use the same process to find it, on a different timeframe this time. Because we are not on the same bar true range values, we need to adapt the percentage threshold for catching the right time, let’s search on 1 hour timeframe with the daily threshold divided by 3. So if we were looking for 3 percent variation on a daily basis, we now scan 1 hour bars to find that we are still in one that made at least 1 percent variation.

Because we assume that trend will continue, now it is time to act like a sheep and to follow the herd ! 🙂

Rewrite everything in a screener ?

Time to code something relevant for what we wanna be our new toy 🙂

I am not adding a trend filter of any kind, since it is a purely intraday short term enter/exit strategy which rely on what its happening right now.

Look at all these opportunities to take positions that our screener report in real time :

Seems that Bitcoin is actually making new higher.

Hold on. Now we must wait for a nice price action continuing pattern, a simple “breakout” of the current high (or low), to identify this breakout we just need to add a Donchian channel indicator, set to 10 periods lookback.

Each any of trading advices you heard till now are still true : take care of round and psych numbers, support and resistance and any economic news worldwide that can affect your trades. Remember that is a simple intraday trading techniques and it should be trade as it is supposed to : don’t hold trades too much, set tight stoploss and don’t be greedy ! Good luck.

Conclusion :

Everything here making sense. We looked at direction, volatility and wait for a neat price action to enter the market. Acting like a robot, with a trading plan, that’s all we were in need to give up emotions in an intraday trading strategy. Of course there will be losers, sometimes more than one in a row, but predicting future were not the actual objective of this article.

Please feel free to react and comment, here or in forum.

Your devoted, Nicolas.

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