Hi,
Calculation should be on the previous Closing Price because we are essentially measuring the volatility vis-à-vis previous closing price (see the formula for R2 & R3).
However, one further refinement that is possible is to use Last Traded Price (LTP) instead of previous Closing Price in the entire calculation. After all, LTP is an actual price at which the final trade for the day took place while Closing Price is just a fictional price arrived at as Weighted Average Price of the last 30 minutes of trade. I think using LTP will make the calculation truly perfect, capturing volatility in its true essence. Though in practice the results may not be very different from using Closing Price as I have done above.
I guess any standard momentum indicator such as Relative Strength or RSI would be good enough, I haven’t thought much about it.
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