Volatility Strategies
Trade based on volatility expansion, contraction, and regime changes using ATR, Bollinger Bands, VIX, and implied volatility.
4 Strategy Templates
Volatility Strategies trade either the absolute level of volatility (entering when it's extreme, expecting mean-reversion) or the transition from low to high volatility (entering a squeeze, expecting expansion). Volatility mean-reverts more reliably than price does. Periods of unusually low or high volatility almost always resolve back toward historical norms. which makes volatility-based setups among the more statistically defensible approaches.
The strategies here cover four canonical volatility plays. ATR Expansion trades sudden expansions in Average True Range, which historically precede directional moves; entering on the first expansion bar with stops at the prior bar's close captures the opening extension. Inside Day + Low ATR trades the opposite. Extreme consolidation (inside day with ATR at multi-day lows) predicting upcoming expansion, taking both long and short breakout triggers. NR7 Breakout is the classical "narrowest range in 7 days" setup, trading the break of an NR7 bar's range the next session. Volatility Squeeze detects Bollinger Bands contracting inside Keltner Channels. Hawkins' volatility-compression signal. and trades the break. Across all these strategies, the critical calibration is instrument-specific volatility regime. What counts as "extreme" for SPY differs from Bitcoin from cocoa futures; calibrate thresholds per instrument using rolling-percentile comparisons, not fixed numeric thresholds.
When Bollinger Bands compress inside Keltner Channels, a squeeze is occurring. The eventual breakout from the squeeze produces explosive moves.
When the ATR rises above its moving average, volatility is expanding. Trade in the direction of the expansion for momentum captures.
NR7 (Narrowest Range of 7 days): today's range is the smallest of the last 7 trading days. A clear volatility contraction. Explosive breakouts follow these compressed days more often than random chanc...
An inside day (entirely within prior day's range) combined with 20-day-low ATR signals double volatility compression. A coiled spring. Trade the break of the inside day in the direction of trend for o...