Moving average

The moving average is probably the most common technical indicator used by traders. Although the indicator is simple to use, the information provided is priceless.

To put it simply, the moving average measures the average movement of the market over a period of X. X can be arbitrarily set by your own preferences.

For example, if you prefer to use 20 SMA in the daily chart, then the moving average shows the average price trend over the past 20 days.

Of course, there are other types of moving averages, such as exponentially weighted moving averages, but the purpose of this lesson is not to discuss these details in more detail.

If you want to learn more about moving averages, or if you just need to review this knowledge, you can go back to our previous study courses to learn.

Bollinger Band

Bollinger Bands is an excellent tool for measuring market volatility, because this is also the strength of Bollinger Bands.

Bollinger bands are usually composed of 2 lines with a standard deviation of 2, these two lines are distributed above and below the moving average of the X period of time, X is also set by you.

For example, if you set the X value to 20, then you will get 20SMA and the other two lines. One is a line with a standard deviation of +2, and the other is a line with a standard deviation of -2.

When the Bollinger band opening shrinks, it means that the volatility is reduced;
When the Bollinger band opening expands, it indicates that the volatility increases.

ATR indicator

The last available indicator is the true average area indicator (ATR).

The ATR indicator is also a very effective indicator for measuring volatility, because it tells us the average volatility interval in the past X period of time, X is also set by our preferences.

For example, if you set the ATR indicator to 20 on the daily chart, then it shows the average trading interval in the past 20 days.

When ATR decreases, it indicates that market volatility is decreasing, and when ATR increases, it indicates that volatility is increasing.