Quote Originally Posted by adam ali View Post
IWM briefly reversed the 65,5 volatility stop before closing under its old limit. SPY and QQQ reversed exactly just before their own volatility stops could react. This can only be interpreted as yesterday’s gain being extreme, but just “normal” under current volatility.

Billy, could you elaborate on this when you have a moment, i.e., why it would be interpreted thus, and add a bit more explanation on the use of 65,5 vol stops. Some of this you've covered before but my recollection is a bit stale. Thanks very much.
Adam,
The TC2000/freestockharts help menu links to this page for the definition and settings of the indicator they use.
http://www.linnsoft.com/tour/techind/vstop.htm
On the 30 minute chart, I use a 65-period (rolling 5 days) true range with a multiple of 5 times the true range. Hence the 65, 5 setting.
So, my settings show what “extreme” moves are “normal” without warning of a trend reversal within a rolling 5-day window. I came to use these settings by trial-and-error and to use it in conjunction with the 5-day average of price and VWAP.
I don’t use it as a stop reference but as an area where to enter a new position in the direction of the former trend, especially if I see a 3:1 R/R pivot entry limit in the vicinity. Today, all 3 ETFs have reversed their volatility stop, so I am looking to enter shorts at or near 3:1 R/R pivot entries.
These are : 70.81 for IWM, 116.74 for SPY and 53.10 for QQQ. Any short entry at or above these prices do provide strong reward-risk edges for the next 5 days from my experience.
Billy