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Volatility Bands as a Long Term Strategy
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| Added: May 29, 2007 |
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This article "Volatility Bands As A Long Term Strategy",by Ahmet Tezel,
Ph.D., and Suzan Koknar-Tezel, M.S., which appears in this issue introduces two
different volatility band trading systems. One systemuses bands based on moving
averages and the other is based on bands whichuse regression. To plot the Moving
Average Asymmetric Volatility Price Bandsin MetaStock for Windows, simply plot
Bollinger Bands using 11 periods and 1.7 standard deviations. Then click your
right-mouse button while the cursoris over the lower band and choose properties.
Change the standard deviations to 2. This plot will now appear exactly as the
bands discussed in the article.
To plot the Regression Asymmetric Volatility Price Bands in Metastock for Windows,
simply plot Standard Error Bands using 21 periods, 1 for standard errors, and
1 for the smoothing periods. Then click your right-mouse button while the cursor
is over the lower band and choose properties. Change the standard errors to
1.5.
To recreate the systems in MetaStock for Windows, choose System Tester from
the Tools menu. Next choose New and enter the following trading rules and stop
conditions. After entering this information, choose Options and change the trade
delay to 1, then change the Trade Price to Open. If you have MetaStock 6.5 enter
the first set of formulas. MetaStock 6.5 allows variables which will allow you
to change the periods when testing much more easily.
Code:
MovAvg Asymmetric Volatility Price Bands
Enter Long:
Periods := 11;
UpperBand := BBandTop(CLOSE,Periods,S,1.7);
BuySignal1 := Sum(CLOSE > UpperBand,3) = 3;
BuySignal2 := CLOSE > UpperBand AND Ref(LOW,-1) > Ref(upperband,-1);
BuySignal3 := LOW > UpperBand AND Ref(CLOSE,-1) > Ref(upperband,-1);
BuySignal4 := CLOSE > UpperBand AND CLOSE > 1.4 * LLV(LOW,Periods + 1)
AND Mov(VOLUME,3,S) > 2000 {assuming volume in 100's otherwise use200000}
AND Mov(HIGH,3,S) > UpperBand AND Mov(HIGH - LOW,3,S) > Mov(HIGH- LOW,Periods,S);
BuySignal1 OR BuySignal2 OR BuySignal3 OR BuySignal4
Close Long:
Periods := 11;
LowerBand := BBandBot(CLOSE,Periods,S,2);
SellSignal1 := Sum(CLOSE < LowerBand,3) = 3;
SellSignal2 := CLOSE < (1-.18) * HHV(HIGH,Periods + 1) AND Sum(CLOSE <
LowerBand,2) = 2;
SellSignal3 := CLOSE < (1-.18) * HHV(HIGH,Periods + 1) AND HIGH < LowerBand;
SellSignal1 OR SellSignal2 OR SellSignal3
STOPS
-----
Maximum Loss: LONG ONLY
10.00 Percent
Regression Asymmetric Volatile Price Band
Enter Long:
Periods := 21;
UpperBand := STEBandTop(CLOSE,Periods,1) ;
Sum(CLOSE > UpperBand,3) = 3 AND LinRegSlope(CLOSE,21) > 0 AND ROC(Correl(CLOSE,Cum(1)
,21,0),2,$) >= .2
Close Long:
Periods := 21;
LowerBand := STEBandBot(CLOSE,Periods,1.5) ;
SellSignal1 := Sum(CLOSE < LowerBand,3) = 3;
SellSignal2 := CLOSE < (1-.18) * HHV(HIGH,Periods + 1) AND HIGH < LowerBand;
SellSignal1 OR SellSignal2
STOPS
-----
Maximum Loss: LONG ONLY
10.00 Percent
Author: Ahmet and Suzan Tezel
Source: http://www.equis.com
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