What is Historical Volatility Indicator (Trading strategy)

Historical Volatility is the volatility that historically happened in the past for particular stocks at any given time period. using this you can see how historical price deviated from the average Price of the Time Period.

HV indicator gives you an assumption of the share price volatility base on past value. It shows you how stock prices fluctuate in the past from the average.

Historical Volatility Indicator Setting

Historical Volatility indicator
  • Field: By default It’s close. Means closing price, closing Price will take to calculate this indicator value. ( Other’s options also available, like Opening price, high, low, etc prices)
  • Period: By default period value is 10. Period means a share price candle. 10 period means 10 candles. So here, 10 candle prices will take to calculate this indicator value.
  • Days Per Year: this will show annualized historic volatility. Generally, the share market is open 252 days in one year.
  • Standard Deviations: standard deviations by default value is 1. This means the value will deviate 1 time. If you increase this value to 2. Then indicator value will be double.
  • Result: this is the indicator line color.

Calculation

First this indicator calculates 10 periods volatile then multiple the Volatility with the 252 periods. So if your chart time frame is 1 day. Then the 252 period is equal to 252 days or annualized historic Volatility of the stock.

Historical Volatility indicator Trading strategy

Historical volatility indicator will tell you, in the past how much stock price deviated from the Volatility average. And assumed that how share price volatility behaves with the current situation base on past data.

But It’s cannot tell you future volatility because some High volatile stock can be low volatility stock in the future. Similarly, some low volatility stock can be high volatility stock in the future. Also, Volatility depends on Trader’s activeness in the stock. When the share price is in uncertainty or big news that timeshare price is more Volatile.

This indicator will not project future volatility of the stock.

Conclusion

This indicator shows you, how much-annualized Volatility price deviated from the average historical price. That will help to assume share price behavior base on past volatility.

*Read related Post for more information. or if any question you have please ask me in the comment below.

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