Dear all,
Over the last few weeks there has been a lack of volatility that has had everyone moaning about how difficult it is to trade ‘these markets’. I am developing an EA (not a holy grail at all, just something to automate my edge) and things had been going very well (reasonable profit/low drawdown) until roughly 4-6 weeks ago.
My question is, can we develop a mathematical formula to analyse liquidity and volume so that upon a decrease in volatility we can avoid entering trades/set lower targets/make whatever adjustments are necessary to ensure profitability?
The first thought I had involved creating a system that measured the average daily range for the last three days and then comparing it to the average daily range for the last three months. If D3 range < MN3 range then no trades would be taken until three successive days each with an increased range followed. However, this seems very arbitrary and I am not convinced that using the ‘three successive days each with an increased range’ parameter is the best way to gauge a return of volatility.
Many thanks in advance,
Adrian
PS Some of you may see a similar thread of mine in the Forextown subsection asking about ways to categorise recent markets. Sorry if there is any crossover; I will try to merge the useful information into one thread if there is a lot of interest shown in this idea.