Volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices. Volatility is normally expressed in annualized terms, and it may either be an absolute number (Rs. 5) or a fraction of the mean (5%). This Volatility Calculator uses volatility to create a intraday trading system and generate buy sell levels. Mobile users may need to scroll horizontally to see the full Volatility Calculator below.
How to use this volatility calculator?
1. To use this calculator you need the previous day closing price and current day’s prices.
Apart from this you also need the volatility value for any stock. You get this value from www.nseindia.com pictorial guide here
This calculator can be used at anytime after one hour (10:00 am) during the day. Ideal time is 10:00 – 11:30 am
2. Now let us see how to use this calculator. Lets say we want to find the values for Nifty Futures for today (08/04/2010) at 10.00 am.
3. I will first see the close price of Nifty Futures for previous day. (Close price is 5381)
4. To Find the volatility, I open the Get Quote for Nifty Future on www.nseindia.com. At the bottom, i see the volatilty at 0.86
5. After entering the Closing Price, volatility as seen in www.nseindia.com, I will enter current days high (5370), low (4348) and last traded price (5355.15).
6. I calculate the levels using the button.
7. I get the message as:
Sell at / below 5359 for following Target and stoploss
Target 1 : 5346.86 Target 2 : 5335.29 Target 3 : 5323.72 Target 4 : 5300.58 Target 5 : 5289.01
Stoploss : 5370
8. The Nifty Futures crashed to 5290.10. Target 1, Target 2, Target 3 and Target 4 were achieved.
Note: The above calculations are just an indication / suggestion based on volatility. You may include other indicators as well to confirm the prices.
How this Volatility Calculator works?
We have seen that many traders never make any success in intraday trade. Learning little and simple technique can make someone a winner in intraday trading. Here is one such simple technique to use for intraday trading.
Interprete the daily volatility. It is the parameter which will gives you the most likely move the scrip can swing in a day. In this case the term “swing” means high and low difference in a day.
Then the next question is how to find the volatility. You need to refer to the daily volatility column given in the NSE site against your scrip or you may click here for the pictorial guide. I have taken the same to explain this concept to you. You may get a figure 0.86 for 8th April 2010 price quote in the bottom of the page. In other words it says the nifty future has the potentiality to generate 0.86% returns today either in the buy side or in sell side. For example if the midpoint between today’s high and low in Nifty future is 5350 it may generate 5350X0.86%=46 points return either side. This small arithmetic information is sufficient enough for us to take a wise trade decision.
This same trick can me applied to all the stocks just by referring its daily volatility and applying the mid point concept on it. Try to use the above discussed technique in Nifty Future or on any liquid stocks or futures and experience the success.