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Wilder Volatility Index - Average True Range Trading System
The Wilder Volatility Index Trading System is a strategy introduced and developed by J. Welles Wilder in the "New Concepts in Technical Trading Systems" book.
The trading strategy is a long/short system that buys a stock or a security when a bull/long signal is generated, then exits and shorts the security when a bearish/short signal is generated.
The bullish signal occurs when the close price crosses above the following indicator: Previous value of the lowest close price for the last 7 trading days plus the previous value of the Average True Range using a 7-bar period multiplied by three.
The bearish signal occurs when the above formula (Minus sign is used instead of the Plus sign in the short signal) crosses above the close price.
The strategy doesn't contain sell or cover trading rules. A trade is automatically closed when a reverse order is found. The position is closed when it is currently shorted and a long signal is generated or when it is bought and a short signal is generated.
The trading system uses the Average True Range (ATR). You can also use a technical analysis indicator called Wilders Volatility Index instead of the Average True Range. This indicator is almost the same as the ATR; the difference is that it allows you to specify a constant parameter that is used to increase or decrease the weight of previous True Range values.
The Wilders Volatility Index can be downloaded here Wilder Volatility Index - Average True Range
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
