Re: Crystal Ball Predictions
Posted: Sun Oct 23, 2022 7:44 pm
So to continue with our search for an easy 'set and forget' weekly strategy. Just 2 inputs, we keep the options market implied volatility high low bands for targets and stops and add a new direction rule.
To recap, the IV bands are forward looking instead of Bollinger bands or ATR bands that are based on an average of past data. IV bands are based on actual trades placed in the options market for the coming day, week, month. The price of an option is a function of the volatility of the underlying market, short term options (daily, weekly) are seldom under or over priced, it is the range expected, but direction is not known.
The IV targets therefore are quite modest, they the represents the range where 68.2% of options trades expect price to reach, the low band represents the short side trades and the high band the long side.
Looking at the H1 gbpusd chart of the last week with next weeks high/low targets shows not unreasonable trader expectations.
The difficulty then is predicting direction and in this second experiment, in keeping with the 'keep it simple' mentality, I shall test using the previous weeks direction expecting continuation for the following week. Dojis' I will call as reversals.
This coming weeks predictions:
To recap, the IV bands are forward looking instead of Bollinger bands or ATR bands that are based on an average of past data. IV bands are based on actual trades placed in the options market for the coming day, week, month. The price of an option is a function of the volatility of the underlying market, short term options (daily, weekly) are seldom under or over priced, it is the range expected, but direction is not known.
The IV targets therefore are quite modest, they the represents the range where 68.2% of options trades expect price to reach, the low band represents the short side trades and the high band the long side.
Looking at the H1 gbpusd chart of the last week with next weeks high/low targets shows not unreasonable trader expectations.
The difficulty then is predicting direction and in this second experiment, in keeping with the 'keep it simple' mentality, I shall test using the previous weeks direction expecting continuation for the following week. Dojis' I will call as reversals.
This coming weeks predictions: