Volatility Stop indicator is a stop level by volatility based on the article "10 Selling Tips" by Thomas Bulkowski.
It has two configurable parameters:
- Period - calculation period
- Multiplier - ratio of the line deviation from the price
Calculation:
VS = Multiplier * HiLoAvg / Close
where:
HiLoAvg = MAH - MAL MAH - SMA(High,Period) MAL - SMA(Low, Period)
It can be used with the Volatility Stop Oscillator indicator.
By default, the indicator line is displayed below the price (Multiplier = 2):
To draw a line above the price, you should enter a negative coefficient value (Multiplier = -2):
The indicator can also be used to create a volatility channel by applying two indicators with different Multiplier values to a chart.
For example, you may use 0.618 for the lower line and -0.618 - for the upper one and trade when the lines of the obtained channel are broken.
