Indicators  |  APR 2006

Volatility, Bollinger Bands, And The Yen by Matt Blackman

Stocks & Commodities V. 24:4 (38-41): Volatility, Bollinger Bands, And The Yen by Matt Blackman Combine volatility with your favorite trading signal, and your trade will become a whole lot easier. Here’s an example using the yen. Traders are taught from the beginning that acting on a single signal to generate a trade is risky, regardless of the asset class or time frame: Which signal will you use to do so? Not only that, relying on different indicators that use the same datapoints may seem sufficient to the uninitiated, but that provides a false sense of security. Relying on two indicators that use the same permutations of high, low, open, and close for confirmation is like expecting a threedimensional image by looking at two television screens at once. All you get is the same image in duplicate. “Using indicators that are not correlated or, at best, have a very low correlation with one another is a far more effective approach for giving traders more confidence in signals that agree,” points out Darrell Jobman, editor in chief at www.TradingEducation.com. “These kinds of signals are truly two dimensional because they rely on different data.”

by Matt Blackman