The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Volatility Analysis

21.4 Chapter Summary

As we have observed, volatility may be characterized in various ways. Being able

to gauge market volatility will afford the practitioner an effective means of iden-

tifying the most appropriate approach in managing positions in the market. Ex-

treme volatility readings also indicate potential market tops and bottoms. Finally,

volatility cycles also offer the practitioners a potentially consistent way of fore-

casting volatility in the market.

Chapter 21 Review Questions

1. Define volatility.


2. Explain how you would measure trend‐based volatility.


3. What is the difference between the first and second measures of volatility?


4. Explain how you would size a stop using ATR.


5. What is the significance of the normal distribution?


6. Describe how you would identify volatility in a consolidation.


7. Can volatility indicate the potential future direction of the markets?


8. Describe some popular market indicators of volatility.

referenCes

Edwards, Robert D., and John Magee. 2007. Technical Analysis of Stock Trends. New

York: AMACOM.

Kirkpatrick, Charles, and Julie Dahlquist. 2007. Technical Analysis: The Complete Re-

source For Financial Market Technicians. Upper Saddle River, NJ: Pearson Education.

Murphy, John. 1999. Technical Analysis of the Financial Markets. New York: New York

Institute of Finance (NYIF).