Volatility Analysis
Volatility is therefore represented, with respect to the first measure of volatil-
ity, by any change above the first order. Hence price momentum, which represents
a change in price, that is, Pricen − Pricen−1, will only indicate volatility if it is ei-
ther rising or falling. This only occurs at the second order of change. Flatlining
momentum on the chart does not indicate the presence of volatility with respect
to the first measure. See Figure 21.6.
As seen in the relationship between price and momentum in Figure 21.6, a
constant change in the rate of change in price is characterized by flattened mo-
mentum action. A change in the rate of change in price is called acceleration and is
depicted by a constant rate of change in momentum. An exponential or parabolic
move in momentum depicts extreme volatility with respect to the first measure.
See Figure 21.7. It is the same chart as in Figure 21.5, but with the 20‐day mo-
mentum oscillator attached.figure 21.6 Relationship between Price and Momentum.figure 21.7 Angular Increment Indicating Volatility with Respect to the First Measure
of Volatility on the Daily Gold Chart.
Source: MetaTrader 4