7. New Indicator: Volatility Stop. The Volatility Stop Indicator helps
define the current trend. The indicator plots a red line above the prices
bars when a downward trend is detected, and a blue line below the bars when
an upward trend is detected. These lines are commonly used as trailing
stops. This indicator is commonly used as a exit tool rather than an entry
technique. When price crosses the VSTOP value, the trend reverses and VSTOP
moves to the other side of price. The VSTOP is calculated as follows:
VSTOP Calculation
When Up Trend Detected....
VSTOP = CL - MULT * TR
As Up Trend Continues....
VSTOP = MAX(VSTOP.1, MaxCL - MULT * TR)
When Down Trend Detected....
VSTOP = CL + MULT * TR
As Down Trend Continues....
VSTOP = MIN(VSTOP.1, MinCL + MULT * TR)
Where...
CL = Closing Price
MULT = True Range Multiplier
TR = True Range
VSTOP.1 = Volatility Stop Value on Previous Bar
MaxCL = Maximum Closing Price since Up Trend Began
MinCL = Minimum Closing Price since Down Trend Began
Trend reverses between up and down when Closing Price crosses VSTOP.
RTL Token: VSTOP
The RTL Token for the Volatility Stop indicator is VSTOP. A common system
for trading the VSTOP might be to look for closing price crossing VSTOP:
Long...
CL > VSTOP AND CL.1 <= VSTOP
Short...
CL < VSTOP AND CL.1 >= VSTOP
More information on VSTOP can be found at:
http://www.linnsoft.com/tour/techind/vstop.htm