Apex Implied Deviation Levels

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Also there is now a webinar below where we covered profit taking levels at bottom of page
CURRENT AND HISTORICAL DIAGNOSTIC DEVIATION LEVELS (Use historical to see how they have measured up on accuracy.
(close is 4:15 ET on futures and 5:00 ET Forex) 

 

(Please note we are working to update this to a live deviation chart that will give signals. Once complete we will then work on building an indicator where the levels feed directly into NinjaTrader. Please leave any suggestions/comments/questions in the community forum).

 

      • Dσ = Diagnostic Implied Deviation (Unlike standard deviation σ)

 

      • Standard deviations that uses past volatility and movement so it is lagging and less accurate and is theoretically built for calculations over longer periods of time.

 

      • The Apex Diagnostic Implied Volatility  formula uses a proprietary formula that factors in the  implied volatility of 4 underlying options for the specific market in the calculation to see what the forward expectation is in the market for a move in either direction so it is a leading indicator. This was built specifically for trades that last less than 5 days whereas most Deviations were built for weeks/months/years.

 

      • Use these levels as maximum expected moves to set target levels for profit and for potential reversal plays off these levels.

 

      • These levels are for a 1 days expected move from the previous days close (On Monday it looks at Friday’s close even if the market is open on Sunday).

 

      • On low volatility days use .5 Dσ levels.

 

      • On reversals off high/low look at .5 Dσand 1Dσ levels off of high low (i.e. High-.5 Dσ or 1 Dσ OR low +.5 Dσ or 1 Dσ)

 

      • (Make sure to factor in overnight Highs/Lows – Reversals become even more potent for reversals when the Dσ levels are hit.

 

      • Look to tighten stops at .5 Dσ. look to take all or partial profits at 1 Dσ. Note this is a probability of touching not expiring at that level. (Note it is recommended that you tighten trailing stops even more around 70% of the move so you don’t end up giving it back because does not hit that exact level.

 

      • .5 Dσ = 34% it will not break out of this level (76% it will break out of this level)
        [note low volatility days (i.e. no news) – .5 Dσ is more like a 1 Dσ on % chance of breakout]

 

      • 1 Dσ = 68% it will not break out of this level (32% it will break out of this level)

 

      • 2 Dσ 95% it will not break out of this level (5% it will break out of this level)

 

      • 3 Dσ 99.7% it will not break out of this level (0.3% it will breakout of this level)

 

      • This can also be effective for selecting binary strikes and evaluating a max expectation in reward on spreads (versus the maximum possible reward)

 

      • On your charting software you may find it helpful to draw horizontal lines at the +.5 Dσ +1 Dσ – .5 Dσ and -1 Dσ
        Also you may want to plot a reversal .5 Dσ or 1 Dσ if you believe the market is reversing to have a target level.
        (There is no need to plot +/-2 Dσ or +/-3 Dσ until 1 is breached)
      • (Note on Friday’s with no news the volatility is often low so tighten stops (partial profits) at 50% of deviation level) See Recent Webinar Where We Discuss These From 8-23-2012 (Under webinar recordings – you must have access to webinars to view this recording)We will be posting a trading video series on various systems to use these levels sometime in Mid-Late September)

 

 

This is a webinar we recently did that was hosted by Nadex regarding taking profit strategies and using Apex Implied Deviation levels.