VolatilityIndicators

Florian Nuebling

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indicators based on statistical methods, probabilities and volatility. As price follows a random walk and assumed to follow a log-normal distributed, the provided concepts are based on log returns for normalization. Returns are mean reverting and can be approximated as normal distributed. The standard deviation of returns is volatility.
These concepts are different to traditional technical analysis (TA), where most calculations are based on price and old concepts like Moving Averages or RSI oscillators. But there is no calculatable probability of a golden cross of Moving Averages. Even back testing will only show you the past. But you can calculate the probabilities of the distribution of log returns. Support and resistance or triangles have no statistical significance, but levels of the underlaying distribution of log returns gives probability of not exceeding a certain price level.

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