Tuesday, March 23, 2010


We have tested this statistic going back to the 1950's on the SP500 Cash Market. Above I have placed 3 graphs of varying time lengths. As can be seen by the graphs, when our volatility statistic is above .95%, the market has "high volatility," and below .95 it has "low volatility." The higher the number, the more volatile the market, the lower the number, the less volatile the market. Over the long term this statistic is quite accurate in defining the underlying volatility of the market. I have never had much success with any other indicators or calculations of volatility. The way we use this figure is that we change our stops when the volatility goes above or below the .95% threshold. We will publish our figure each Friday in the Volatility Statistic page above.

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