4# Without Volatility Trading System
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Without Volatility entries and exits occur in areas of congestion.
The ADX (Average Directional Index) will tell us when a market is in a congestion
phase. Then we'll wait for the market to reach a high or low extreme within the
congestion. When prices are low, we'll buy; when they're high, we'll sell short. Since we're betting that the market will continue to trade within its recent congestion area, we'll exit quickly rather than holding our position and trying to catch a new trend.
To define congestion, we require that ADX be less than 25 and less than it was 3 bars ago. To identify a low price within the congestion, we look for 3 consecutive down closes (closes below the previous bar's close); to identify a high price, we look for 3 consecutive up closes. We enter a long position on the third down-close and a short position on the third up-close. Our protective stop is set at 3 average true ranges (ATR's) from our entry price. Our exit is on the close a fixed number of bars after entry (3 bars is the default value).
Pairs: all.
Time Frame: 15 or higher.
Indicators:
Long Entries:
a) Identify an ADX below 25 and less than it was 3 bars ago.
b) Identify 3 consecutive down-closes.
c) Buy on the third down-close.
Short Entries:
a) Identify an ADX below 25 and less than it was 3 bars ago.
b) Identify 3 consecutive up-closes.
c) Sell short on the third up-close.
Long and Short Exits:
a Stop Loss and Target Profit;
b) Exit on the close of the third bar after entry.
In the pictures belowWithout Volatility Trading System in action.
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