After having proposed with my previous update an interesting template about volatility breakouts, I introduce today a well know indicator about volatility: the Chaikin volatility indicator. Most of those who follow me probably already knows that volatility is ultimately responsible for a traders profits, since if a market does not fucking move (like btc is doing since September) then there is no way to make money from it:)
It’s therefore crucial to recognise those times when volatility is picking up as this offers the opportunity to make a decent trade.
Developed by Marc Chaikin, the Chaikin volatility indicator characterize volatility by calculating the difference between the high and low for each period or trading bar. It measures the difference between two moving averages of a volume-weighted accumulation distribution line.
As you can clearly see when the Chaikin is below zero nothing is going on in the market and during these times you should refrain from trading and wait for the Chaikin to tell you when things are getting interesting. Chaikin is thus excellent to avoid overtrading.
Once the Chaikin peaks, you know that you can start to think about closing your trade or opening a new one in the opposite direction (less recommended).
About the recent prolonged period of low volatility i’m observing an increased volume activity among all the biggest bitcoin exchanges, this let me think that bitcoin is probably accumulating to later break the trading range and move above $250. This break would be confirmed with a positive reading of the Chaikin Indicator (standard settings of 10/10 applied to a daily chart).
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