# What Are Volatility Indicators on MT4?

Using **common volatility indicators** on MT4 might help you make sense of the commotion occurring on forex charts. In forex trading, **volatility has two sides**.

On one side, volatility allows forex traders to benefit, mainly when **trading short-term**. However, opposing this, increasing volatility **reduces the predictability of market moves.**

As a logical investor, you don't want to be caught off guard by market volatility that changes prices in unexpected directions while attempting to execute deals.

We will show a **basic volatility calculation** and **four indicators **that have been shown to assist traders in identifying volatility while considering trade possibilities.

## How Volatility Is Calculated

It is beneficial to understand how volatility works when considering whether to begin a new trade.

- Using the
**standard deviation**of the variance of a currency pair's value over a period of time is one technique to calculate volatility. - This is calculated by
**adding the daily price changes together**and**dividing the result by the number of days.** - After that, you will
**need to subtract the daily price variation**from the**average price change.** - Due to the fact that price changes are sometimes below average,
**some of these will be negative**. **Square these deviations**in order to eliminate all the negative values and work with only positive figures.- To get the variance,
**add these figures and divide by the number of days**. - To get the standard deviation,
**take the variance and square root it**. This standard deviation is often used to determine volatility. Traders may profit from high volatility by buying and selling currency pairs.

A currency pair's volatility may be confirmed by using standard deviation combined with the following technical indicators.

## Volatility Indicator on MT4: Average True Range

The average true range (ATR) is a volatility indicator calculated using **three basic calculations.**

- Firstly, you
**subtract the current day's low from the present day's high**to get to the ATR. - Then, you
**deduct the previous day's close from today's high**. - Finally, the last step requires you to
**subtract the current day's low of the prior day's close to get three different numbers**.

The average true range of a currency pair is the **greatest of the three values**. The greater the figure, the greater the projected volatility for that currency pair.

#### Advantages

Beginners may rapidly learn how to utilize ATR in their trading strategy, and this volatility measuring tool can also assist you in **creating stops and price goals** depending on volatility strength.

#### Disadvantages

While ATR is a simple formula for traders to utilize, it does have limits. The ATR, for example, **doesn't really identify the direction of movement** for a hypothetical price swing; it merely evaluates the possibility of that price swing occurring.

The ATR is also a **trailing indication** rather than a leading indicator. It takes longer to uncover attractive trading opportunities—a drawback if you want to rapidly profit from market volatility.

## Volatility Indicator on MT4: Bollinger Bands

This volatility indicator is a metric that goes two standard deviations (around 95 percent) below and above the moving average of 20-days.

When the gap between the bands increases, it sends out an indication that the currency that you are examining is experiencing **more market volatility**. If the gap is shorter, it indicates **less volatility**.

Traders may use Bollinger Bands not only to gauge overall volatility for a forex listing but also to utilize the closeness of the candle to one of the bands.

When a candle reaches or approaches a Bollinger Band, it indicates a **substantial potential for a retracement**, and traders may be enticed to initiate a position in the hopes of profiting from the next movement.

#### Advantage

Bollinger Bands may be set to monitor three standard deviations over a more extended time period.

#### Disadvantage

Bollinger Bands, like other technical indicators, **depend on previous data**, which may be meaningless if volatility is influenced by current events.

You can read about the Bollinger Bands Squeeze Indicator on MT4 here.

## Volatility Indicator on MT4: Keltner Channel

This is a volatility indicator that examines price fluctuations in relation to a forex currency pair's lower and **higher moving averages**. This indicator is a hybrid of the ATR and the exponential moving average (EMA).

Although the Keltner Channel seems similar to Bollinger Bands, the proper technique to apply this indicator to examine volatility necessitates a distinct strategy.

The Keltner Channel is **substantially narrower** than the Bollinger Bands, which are two standard deviations above the 20-day moving average: Its range is determined by **drawing a band on each side** of the 20-day EMA that is twice the size of the ATR.

Price moves that happen to **break above or below these Keltner Channel **lines should be monitored by traders.

This signals that prices are likely to continue trending in that way, providing some quick profit-taking on imminent instability.

#### Advantage

Even if price activity does not approach the Keltner Channel's boundaries, decreased activity may represent reducing price volatility.

#### Disadvantage

The Keltner Channel is **generally slower than other indicators**, notably Bollinger Bands, in detecting volatility.

## Volatility Indicator on MT4: Parabolic Stop And Reverse

The last volatility indicator in this list is the parabolic stop and reverse.

A parabolic stop and reverse pattern is a forex chart pattern that generates a parabolic curve with dots that appear below or above the price depending on the price's trend movement.

Traders may detect trading opportunities by observing **variations in the positioning of the dots**.

When the dots change from above to below the price, it indicates that trading activity is **producing upward momentum**, resulting in a **buying opportunity**.

When the dots change from **below to above**, it might signal a movement that indicates a **selling opportunity**.

This indicator may assist traders in making sense of unpredictable market circumstances and identifying chart patterns that may bring potential profit.

#### Advantage

PSAR provides a clear visual interpretation that makes evaluating and tracking volatility straightforward.

#### Disadvantage

When volatility and price momentum are not matched, PSAR's indicators may change too often to be useful for traders attempting to use it to evaluate volatility.

#### Conclusion to Volatility Indicators on MT4

In forex, **volatility may be your greatest friend or your worst enemy**—it all depends on how you comprehend it and how you try to profit in these market circumstances while reducing your risk.

These volatility indicators can assist you in gaining a better understanding of an uncertain scenario, which may lead to some opportune trades that transform volatility into a profitable prospect.

Now after knowing Volatility indicators on MT4, you might be also interested in **What is the Swing High Low Indicator on MT4?** and **What is the SSL Indicator on MT4?**

Have you used any of these indicators? You can add your comments below.