New Techniques  |  JUN 1998

Mutated Variables Volatility And A New Market Paradigm by Walter T. Downs, Ph.D.

Mutated Variables Volatility And A New Market Paradigm by Walter T. Downs, Ph.D. Markets move through phases during which volatility fluctuates. Here's how to measure the shifts in volatility and then use that data as a filter for a trading system. Market structure has undergone numerous changes in the past 10 years. A new market paradigm appears to have developed as a result of these changes, and also as a result, common variables in the market appear to have changed and are currently having an impact on technical forecasting tools. The concept of variable mutation can be used to analyze market movement. But first, some basic definitions are in order. The first term is trending structure. This market structure is defined by a primary trend, with smaller retracements considered to be pullbacks within the larger trend. System and indicator signals are generated on breakouts of a defined range, or retracements within a larger trend phase.

by Walter T. Downs, Ph.D.