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August 2013 Stocks and Commodities Traders Tips


Within the Volatility Band

AIQ Version:

Original article by Sylvain Vervoort
AIQ Code by Richard Denning

In Figure 1, I show a chart of CVR Partners LP (UAN) with the setup (yellow circle), the buy signal (green circle) and the exit (red circle). The author indicates that a valid buy signal does not occur unless the closing price has penetrated the lower band and then it closes above the upper band. On 10/3/11, the close of 20.25 is below the lower band of 20.81 and then we have to wait until 1/3/12 for the close of 26.48 to be above the upper band of 25.36. We would enter the next day at the opening price of 26.57. We would stay in the trade until the closing price is below the lower band. The exit does not occur for several months on 5/9/12 when the close of 24.45 is below the lower band of 27.76. We would then exit the next day at the open of 24.41 for a loss of $2.07 plus commission and slippage. The highest close of the trade occurred on 2/2/12, just a few weeks after the entry, for a high open profit of $4.35. The trade would have been profitable if we had used the middle band as the exit. Note that I did not code the suggested trading system as the author indicates that more is to come in future parts of the article series.

Captions:

Figure 1 – chart of UAN with SVE Volatility Bands and setup (yellow), entry (green) and exit (red) signals for the period 10/3/11 to 5/10/12.

EDS Code:
Vola Band.EDS
(right click and choose Save As)


 

Traders Studio Version :

Original article by Sylvain Vervoort
Traders Studio Code by Richard Denning

The following code files are contained in the download below:

  • Function: “SVE_MID_BAND” a function that returns the SVE middle band value and also returns by reference the upper band and lower band values
  • Indicator plot: “SVE_VOLA_BAND_IND” a plotting function that allows the SVE bands to be displayed on a chart.
In Figure 1, I show a chart of the futures contract on the Australian Dollar (AD) using Pinnacle data with the setup (yellow circle), the sell short (red circle) and the exit short (green circle). The author indicates that a valid buy signal does not occur unless the closing price has penetrated the lower band and then it closes above the upper band. On 10/13/2000, there is a close above the upper band followed by a close below the lower band on 1/28/2000. We would sell the next day (1/29/13) at the open. We would stay in the trade until the closing price is above the upper band. The exit does not occur for several months on 12/4/2000 when the close is above the upper band. We would then exit the next day at the open. This is an excellent example of a profitable trend following trade using the author’s indicator.

Captions:
Figure 1 – C hart of ER with SVE Volatility Bands and setup (yellow), entry (red) and exit (green) signals for the period December 2000 to January 2001.

Traders Studio Code:
SVE Vola Bands.zip
(right click and choose Save As)

 

 

 

 

 

 

 

 

 

 

 

 

 

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