QuantitativeExhaustion

Historical Volatility Chart Study with EURUSD

FX:EURUSD   Euro Fx/U.S. Dollar
8427 16 29
What Is Historical Volatility ?

Volatility can be split in two - historical volatility (HV) and implied volatility (IV). I myself place more emphasis on implied volatility. Implied volatility is derived from option prices and provides clues about the current sentiment of option investors.
Compared to implied volatility, historical volatility, similar to most indicators, looks backwards at price action to measure the degree of change in the price of a security.

Questions to ask yourself when viewing HV

1. What period or length do I use?
2. What method of measurement is used?

The appropriate look-back period to use for historical volatility calculations is ultimately a matter of personal taste.
For the daily chart , the most frequently used historical volatility measurement is HV (30), which translates to about 43 calendar days. Most providers of HV data tend to standardize on HV (30). I prefer HV (21) as this is a better approximation of a trading month. HV (10) is better used for short time frames, however, investors should be wary of noise when looking back less than 20 HV length. HV (60) is a popular way to capture the entire earnings cycle.

To capture the big picture, traders might want to look at HV (250), which allows you to capture the entire year. HV (500) will allow you to look at two years. HV (500) is good to use when you have statistical outliers such as 2011 Silver             market, 2008 oil             market or 2008-09 Financial Crisis.

Historical Volatility does not capture the magnitude of any intraday price movements, which are better served by calculations such as an average true range -- ATR

HV/IV Applied to Option Trading

When HV readings / IV sentiment is low you should view this as overly optimistic and or the underlying is stuck in a trading range. This is also a good measure of how cheap your options are, depending on trading strategy and the length you are looking at i.e. HV (10) for day traders or HV (500) for position traders. When HV readings and IV sentiment is high you should view this as overly pessimistic and or a period of high volatility. Higher the IV and HV the more expensive your options are.


AncientM
3 years ago
Why not tell us how to draw it?
Reply
QuantitativeExhaustion PRO AncientM
3 years ago
HV is an indicator and does sometimes show support/resistance.
+1 Reply
We're getting down to some real historical lows in all time lengths.
+1 Reply
Chartreader QuantitativeExhaustion
3 years ago
I am expecting some bullish move on the market open.
+1 Reply
AncientM Chartreader
3 years ago
Hi Chartreader

Larry Summers resignation affected a lot and USD went down against most currencies. But it is good to buy USD now since the gap is expected to be filled up.
+1 Reply
QuantitativeExhaustion PRO AncientM
3 years ago
Good point, Summers was bullish for the USD. Now we see what Federal Reserve does on the 18th.
+1 Reply
snapshot


I do like using HV (10) with lower time frames such as 1H
+1 Reply
accidentjev2 QuantitativeExhaustion
a year ago
Hi JR, I'm currently looking for HV-indicators on Tradingview and I only find the one compiled by HPotter (a year ago). Is that the one showed above? And is Tradingview now offering implied volatility data (cf. https://getsatisfaction.com/tradingview/topics/iv_hv_charting_real_time)? Thanks
Reply
Here is a look at DOWI from 1915 with HV
snapshot
+1 Reply
vaqueas
3 years ago
awesome...thanks for sharing...
Reply
No problem.
Reply
Is IV indicator comming soon to Trading View . :-)
Reply
Vinny10
4 months ago
I can't find a good IV indicator for Tradingview. Do you know a good one out there?
Reply
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