User: moo: Volatility: bluechip bulldog: "Please, Don't Drive A School Bus Blindfolded." - Nassim Taleb

bluechip bulldog: "Please, Don't Drive A School Bus Blindfolded."...

I am continuing my "education" into the meaning of "extreme low volatility" studies or what can be considered "Fat-Tail" events and apply mathematical constructs to reveal the price discovery process in a structured manner from otherwise chaotic price movements. My observations and studies have brought the following understanding, which is underscored by several successful trades:

Extreme Low Volume tests often coincide with Doji candlesticks Extreme Low Volume tests often define levels of support and resistance Just like low volume, high volume buying/selling also defines these levels There are statistically significant levels of low volume and absolute ones - both are meaningful in what happens afterwards. Tests for supply and demand occur often when volume is low yet price bar range can be "large" nevertheless. When combined, low volume testing AND price volatility is without question the best predictor of future price movement. I am finding that the best approach is to trade against inflated volatility and use Fat-Tail events (low volume signals). When volatility deflates, the market soon shows its hand in terms of direction. Spikes in order flow ($TICK) and their frequency is an added "heads up".
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