Using Volatility For Market Assessment and Trading
• Volatility can be used to assess appropriate trading strategies, impending activity shifts and even direction
• There are a range of tools that look into this market dynamic including: VIX, EVZ and ATR among others
• As demand for activity has risen in recent years, volatility products have become trading objectives themselves
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Volatility has become a vital tool for evaluating trade setups and it has even become a favorite instrument for the risk-oriented market participant. In its most basic form, volatility is simply a measure of activity. However, there are a range of applications for this market dynamic that reach beyond an evaluation of whether we are looking at a market that is more or less energetic. Volatility can tell us what strategy to employ (range, breakout, trend), when we are likely to see a shift in market conditions and even direction in some cases. We look at the different uses for volatility analysis in our trading, a few of the popular tools available and how investors' risk profiles have changed the nature of some of the more popular readings in today's Strategy Video.
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