Volatility Trading Strategies for Beginners
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- Live Trading
- Learning Track
- Prerequisites
- Syllabus
- About author
- Testimonials
- Faqs
Learn Volatility Trading Strategies
- Measure volatility using ATR, implement dynamic stop loss and compare the strategy performance with the fixed stop loss approach.
- Define the standard deviation of a stock and implement it in a trading strategy.
- Explain Bollinger bands, the different phases of Bollinger bands and create strategies to identify and trade trends.
- Explain VIX, describe the properties of VIX and list the VIX derivatives.
- Implement portfolio hedging, selectively long strategy using VIX and VIX spread strategy.
- Define beta, describe the CAPM model, and research and backtest a portfolio of stocks selected on the basis of beta.
- Paper/live trade, analyse your strategies and assimilate your learnings with a capstone project.

Skills Required for Volatility Trading
Strategies
- ATR
- Bollinger Bands
- Breakout
- Portfolio hedging using VIX
- Betting against Beta
Concepts & Trading
- Moving average & moving standard deviation
- Volatility Index
- True Range
- Beta
- VIX Derivatives
Python
- Pandas
- Numpy
- Matplotlib
- Ta-lib
- Seaborn

learning track 1
This course is a part of the Learning Track: Algorithmic Trading for Beginners
Course Fees
Full Learning Track
These courses are specially curated to help you with end-to-end learning of the subject.
Course Features
- Community
Faculty Support on Community
- Interactive Coding Exercises
Interactive Coding Practice
- Capstone Project
Capstone Project Using Real Market Data
- Trade & Learn Together
Trade and Learn Together
- Get Certified
Get Certified
Prerequisites for Volatility Trading
To start with the course, you need to have a basic understanding of the financial market. You should also be aware of some trading related terminologies such as long, short, stop-loss, profit target, etc. A hands-on experience in using trading platforms is recommended. Familiarity in using python would be an added advantage.
Volatility Trading Strategies Course
- IntroductionLearn the application and effectiveness of volatility based trading strategies. You will be guided through the course structure and the various concepts covered in this course. Also, you can explore the various features that are available to you on Quantra.
Entry Signals
In this section, you will learn about the moving average crossover strategy. You will learn to generate entry signals using moving average crossover.Section Overview3m 8sMoving Average Crossover4m 17sFeatures of Moving Average2mCalculate Moving Average2mHow to Use Jupyter Notebook?1m 54sDetermine the Entry Points10mGetting Started5mEntry Signals2mCalculate SMA5m- Fixed SL & TPExiting using fixed stop-loss and fixed take profit is the simplest way of exiting an open position. In this section, you will learn how to implement the same in python.Exit Using Fixed Stop-Loss and Take Profit10mCalculate Fixed Stop-Loss5mCalculate the Trading Cost5m
ATR
In this section, you will learn about a volatility based indicator called The Average True Range (ATR). You will learn to calculate the True Range and Average True Range to measure stock volatility.Measuring Volatility using ATR2mDays Range2mProperties of True Range2mCalculate True Range2mATR Indicator2mCalculate ATR2mThe Magnitude of ATR2mAdditional Reading for ATR10mSL & TP using ATR
In this section, you will learn how ATR can be used to determine the exits. Calculating stop-loss and take profit prices will be explained with examples.ATR to Determine Exits4m 44sLimitation of Fixed Percentage Approach2mATR Value2mATR for Exits2mPossible Range2mBenefits of Dynamic Exits2mDetermine Stop-loss2mReset Stop-loss2mExit Using ATR10mCalculate ATR for a Stock5mDynamic Stop-Loss5mComparison Between Fixed and Dynamic Approaches10mLimitations of ATR10mCompare ATR Values2mVolatility and Price Change2mCompare Volatility2mAdditional Reading for SL & TP using ATR10m- Live Trading on BlueshiftThis section will walk you through the steps involved in taking your trading strategy live. You will learn about the backtesting and the live trading platform, Blueshift. You will learn about code structure, various functions used to create a strategy and finally, paper or live trade on Blueshift.Uninterrupted Learning Journey with Quantra2mSection Overview2m 19sLive Trading Overview2mVectorised vs Event Driven2mProcess in Live Trading2mReal-Time Data Source2mBlueshift Code Structure2m 57sImportant API Methods10mSchedule Strategy Logic2mFetch Historical Data2mPlace Orders2mBacktest and Live Trade on Blueshift4m 5sAdditional Reading10mBlueshift Data FAQs10m
Live Trading Template
This section includes a template of a trading strategy that can be used on Blueshift. This live trading strategy template uses moving average crossover for entry signals and ATR for exit signals. You can tweak the code by changing securities or the strategy parameters. You can also analyse the strategy performance in more detail.- Measuring Volatility Using Standard DeviationThis section introduces you to the concept of standard deviation. You will learn to calculate standard deviation and use standard deviation to measure stock volatility.Standard Deviation2m 41sIntuition of Standard Deviation2mComparing Standard Deviation2mMeasuring Volatility2mCalculation of Standard Deviation2m 5sCalculate Standard Deviation of a Stock5mStandard Deviation Formula2mVariables of Standard Deviation Formula2mMean and Standard Deviation2mAdditional Reading on Standard Deviation10m
- Applications of Standard Deviation In TradingIn this section, you will learn the applications of standard deviation in trading. Calculating trading range and deciding exit parameters using the volatility will be explained with examples.How to Use Standard Deviation In Trading?3m 6sStandard Deviation of a Stock2mTrade Parameters Using Standard Deviation2mVolatility Based Stop Loss2mTest on Volatility and Standard Deviation14m
Bollinger Bands
This introduced you to the most used volatility-based trading indicator, Bollinger Bands. You will learn to calculate Bollinger Bands. You will also learn to interpret Bollinger Bands to study the price and volatility of an asset.Bollinger Bands Calculation4m 44sFormulas of Bollinger Bands10mBasics of Bollinger Bands2mMoving Average2mDefinition of Bollinger Bands2mCalculate Bollinger Bands of a Stock5mInterpretation of Bollinger Bands2m 55sEntry and Exit Conditions of Oversold Trading Strategy10mBollinger Bands Study2mElements of Bollinger Bands2mOversold Condition2mOversold Trading Strategy10mOversold Strategy Signals5mAdditional Reading on Bollinger Bands10m- Bollinger Bands PhasesIn this section, you will be introduced to the concept of Bollinger bandwidth. You will learn to study the volatility cycles using the Bollinger Band phases. All four types of Bollinger Band Phases are explained in detail to give you an intuitive understanding.Interpretation of Bollinger Bands Phases5m 20sFormulas of Bollinger Bands Phases10mBollinger Squeeze2mBollinger Phases2mVolatility Cycle2mAdditional Reading on Bollinger Bands Phases10m
Breakout Strategy
In this section, you will understand how to create a trading strategy using Bollinger Band phases. You will learn the entry and exit conditions of the breakout trading strategy designed using the Bollinger Band Phases.Breakout Strategy Using Bollinger Phases6m 54sLong Entry and Exit Rules of Breakout Strategy10mPhase Transition2mLong Breakout Entry Conditions2mVolatility Transition2mBreakout Strategy Implementation10mBB Bandwidth5mEntry Signals5mExit Signal5mAdditional Reading on Breakout Strategy10mBreakout Strategy Blueshift Live/Paper Trading Template10mVIX
Introduction to VIXVolatility During Unexpected Events2mLong Term Effect of Volatility2mVolatility Based Trading2mHedge Index Futures2mPosition in VIX Decline2mTypes of Volatility1m 38sProperty of Implied Volatility2mInterpretation of VIX3m 39sMaximum Value of VIX2mInterpretation of Implied Volatility2mDaily Volatility Using VIX2mVIX and Low Volatility2mAnnualised VIX2mVIX Level Interpretation2mVolatility in Different Time Periods Using VIX2mTypes of VIX1m 47sVolatility Index and S&P5002mTrade Gold VIX Futures2mVIX and Eurozone Volatility Index2mWebinar Snippet - Introduction to Volatility8m 40sWebinar Snippet - Why Is VIX Called the Fear Index?7m- More on VIXCalculation of VIX5m 40sOption Premium During Uncertain Periods2mInclusion of Options Based on Time of Expiry2mExclusion of Options Based on Time of Expiry2mInclusion of Options Based on Moneyness2mType of Options in VIX2mInclusion of Options Based on Bids2mInclusion of Options Based on Consecutive Bids2mProperties of VIX2mCorrelation of VIX and S&P5002mVIX Time Series2mImpact of Positive News on VIX2mVIX Derivatives2mHedge on VIX Futures2mIdentification of VIX Derivatives2mRelationship Between VIX ETNs and VIX Futures2mAdditional Reading10m
- Hedging Using VIXIn this section, you will understand the inverse relationship between VIX and S&P 500. You will learn about the concept of hedge ratio. Further, you will apply the concept of hedge ratio to create a hedging strategy using VIX ETF.Hedging With VIX ETF2m 13sFall in S&P 5002mHedging the Losses2mHedge Ratio2mHedge Ratio - Always a Fixed Value?2mDetermine Hedge Ratio2mPortfolio Hedging Using VIX10mCompute Strategy Parameters5mCalculate Daily Strategy Returns of Combined Portfolio5m
- Selective Long on VIXIn this section, you will improvise on the previous strategy by going selective long on VIX. You will also discover different ways to select when to go long on VIX.Selective Long VIX Strategy5m 12sIdentify Best Performing Assets2mAlways Long on VIXY2mVIXY Monthly Returns2mImprove Strategy Performance2mVIX Levels2mDrawbacks of Fixed VIX Value2mCapture Panic Dynamically2mSMA for Entry2mExit Conditions2mAvailable Cash In Selectively Long Strategy2mSelectively Long Strategy Returns2mCompare Selectively Long with S&P 5002mGoing Selectively Long on VIX10mGenerate Buying Signal5mSelective Long on VIX Blueshift Live/Paper Trading Template10m
- VIX SpreadVIX Spread Concept2m 52sVIX Spread Strategy10mFAQ10mTest on Bollinger Bands and VIX16m
- Understanding BetaIn this section, you will understand the concept of beta and what it is used for. You will learn about systematic and unsystematic risk. You will also discover what type of risk is measured by beta and how beta values are interpreted.Beta and Its Interpretation2mAdditional Reading for Drawbacks of Beta10mIdentify the Type of Risk2mDefine Beta2mIdentify Beta Value2mInterpretation of Beta - I2mInterpretation of Beta - II2mMatch the Beta Value - I2mMatch the Beta Value - II2mSelect a Stock Based on Beta2m
- Calculating BetaThis section explains how to calculate beta using the linear regression model with the help of Python. You will learn about the elements of the regression equation. You will also understand how to get the beta coefficient from a linear regression model.Pre-reading10mHow to Calculate BetaDefine the Variables2mDescribe the Element2mDefine the Slope of Line2mIdentify Approximate Beta2mIdentify the Linear Regression Equation2mIdentify the Beta Value2mIdentify Correlation2mIdentify Volatility2mIdentify the Relevance of Beta2mIdentify the Independent Variable2mCalculate Beta With Python10mIdentify the Number of Trading Days2mAdd the Constant Term5mCalculate Beta5mFetch the Values5m
Betting Against Beta
In this section, you will learn about the premise of the “Betting Against Beta” strategy. It includes a simple explanation of the author’s hypothesis. It also includes the steps that are required to implement the strategy.Application of Beta2mDescribe the Use of CAPM2mDefine Risk-free Rate of Return2mDefine Market Risk Premium2mDescribe the Theory of CAPM2mCalculate Expected Returns2mBetting Against Beta3m 35sIdentify the Valuation2mDefine the BAB Strategy2mDescribe the Hypothesis2mDefine Alpha2mSelect a Stock to Buy2mResearch on BAB
This section attempts to validate the author’s hypothesis of the “Betting Against Beta” or the BAB strategy. This is done by testing the strategy on the past data of S&P 500 stocks and checking if it works by analysing the past performance of these stocks.Research on BABData for Calculating Beta2mDescribe Strategy Testing2mSteps to Implement the BAB Strategy2mIdentify the Order of Ranking2mIdentify the Criteria of Bucket Creation2mResearch on BAB - I10mSplit the data into train & test5mCalculate Beta for Multiple Stocks5mCreate Stock Buckets5mCalculate Average Returns for Each Bucket5mResearch on BAB - II10mBacktesting BAB
This section will teach you how to backtest a modified strategy based on the research made on the BAB paper in the previous section. On this opportunity, you will go long on high beta stocks to check whether we can be profitable with them. Data will be provided from 2015 to 2022.BAB Backtesting - I10mIdentify the Function2mCalculate the Returns of the Chosen High Beta Stocks5mBAB Backtesting - II10mTest on Beta10m- Run Codes Locally on Your MachineIn this section, you will learn to install the Python environment on your local machine. You will also learn about some common problems while installing python and how to troubleshoot them.Python Installation Overview2m 18sFlow Diagram10mInstall Anaconda on Windows10mInstall Anaconda on Mac10mKnow your Current Environment2mTroubleshooting Anaconda Installation Problems10mCreating a Python Environment10mChanging Environments2mQuantra Environment2mTroubleshooting Tips for Setting Up Environment10mHow to Run Files in Downloadable Section?10mTroubleshooting for Running Files in Downloadable Section10m
- Capstone ProjectThis section will help you to develop a breakout strategy learnt in the Bollinger Bands section in order to identify the top 5 stocks from the S&P 500 that perform well from 2010 to 2022.Capstone Project: Getting Started10mProblem Statement10mFrequently Asked Questions10mCode Template and Data Files2mCapstone Project Model Solution10mCapstone Solution Downloadable2m
- Course SummaryIn this section, we will summarise all the volatility trading concepts and strategies that you have learned throughout the course. By the end of this section, you will get an idea of what you can do next to further improve your trading skills.Summary4m 49sCourse Summary and Next Steps10mPython Codes and Data2m
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Faqs
- When will I have access to the course content, including videos and strategies?
You will gain access to the entire course content including videos and strategies, as soon as you complete the payment and successfully enroll in the course.
- Will I get a certificate at the completion of the course?
Yes, you will be awarded with a certification from QuantInsti after successfully completing the online learning units.
- Are there any webinars, live or classroom sessions available in the course?
No, there are no live or classroom sessions in the course. You can ask your queries on community and get responses from fellow learners and faculty members.
- Is there any support available after I purchase the course?
Yes, you can ask your queries related to the course on the community: https://quantra.quantinsti.com/community
- What are the system requirements to do this course?
Fast-speed internet connection and a browser application are required for this course. For best experience, use Chrome.
- What is the admission criteria?
There is no admission criterion. You are recommended to go through the prerequisites section and be aware of skill sets gained and required to learn most from the course.
- Is there a refund available?
We respect your time, and hence, we offer concise but effective short-term courses created under professional guidance. We try to offer the most value within the shortest time. There are a few courses on Quantra which are free of cost. Please check the price of the course before enrolling in it. Once a purchase is made, we offer complete course content. For paid courses, we follow a 'no refund' policy.
- Is the course downloadable?
Some of the course material is downloadable such as Python notebooks with strategy codes. We also guide you how to use these codes on your own system to practice further.
- Can the python strategies provided in the course be immediately used for trading?
We focus on teaching these quantitative and machine learning techniques and how learners can use them for developing their own strategies. You may or may not be able to directly use them in your own system. Please do note that we are not advising or offering any trading/investment services. The strategies are used for learning & understanding purposes and we don't take any responsibility for the performance or any profit or losses that using these techniques results in.
- I want to develop my own algorithmic trading strategy. Can I use a Quantra course notebook for the same?
Quantra environment is a zero-installation solution to get beginners to start off with coding in Python. While learning you won't have to download or install anything! However, if you wish to later implement the learning on your system, you can definitely do that. All the notebooks in the Quantra portal are available for download at the end of each course and they can be run in the local system just the same as they run in the portal. The user can modify/tweak/rework all such code files as per his need. We encourage you to implement different concepts learnt from different learning tracks into your trading strategy to make it more suited to the real-world scenario.
- If I plug in the Quantra code to my trading system, am I sure to make money?
No. We provide you guidance on how to create strategy using different techniques and indicators, but no strategy is plug and play. A lot of effort is required to backtest any strategy, after which we fine-tune the strategy parameters and see the performance on paper trading before we finally implement the live execution of trades.
- What does "lifetime access" mean?
Lifetime access means that once you enroll in the course, you will have unlimited access to all course materials, including videos, resources, readings, and other learning materials for as long as the course remains available online. There are no time limits or expiration dates on your access, allowing you to learn at your own pace and revisit the content whenever you need it, even after you've completed the course. It's important to note that "lifetime" refers to the lifetime of the course itself—if the platform or course is discontinued for any reason, we will inform you in advance. This will allow you enough time to download or access any course materials you need for future use.
- What is Volatility Trading? Is it suitable for beginners?
Prices exhibit fluctuations because of the imbalance of supply and demand forces in the market and also due to the change in market sentiment. These fluctuations in prices in either direction are called volatility, and implementing trading strategies based on volatility is called volatility trading. Volatility trading strategies can be implemented by beginners as well as professionals.
- What are some popular volatility trading strategies?
You can use technical indicators to estimate volatility and trade based on them. For example, you can determine entry or exit signals based on volatility based technical indicators like ATR or Bollinger bands. If you want to go one step further, you can look at volatility index (VIX) based derivates for trading as well.
- What are the risks associated with volatility trading?
Volatility spikes can be unpredictable, making risk management crucial. Some volatility instruments may have low liquidity, leading to higher slippage. Also, unexpected news can cause volatility surges, making risk hedging important.
- How can I identify and measure volatility in trading?
You can look at historical volatility which measures past price fluctuations over a period. You can look at standard deviation, ATR and bollinger bands. In contrast, implied volatility (IV) measures the market’s expectation of future volatility.
- Which markets are commonly used for volatility trading?
Volatility based trading is not restricted to any market.
- What is the VIX, and why is it important?
The VIX (Volatility Index), which is informally called the “fear index,” measures the expected 30-day volatility of the S&P 500 index based on S&P500 options pricing. Usually, a rising VIX suggests increased uncertainty, while a low VIX indicates stability.
- Can you trade the VIX directly?
The VIX is an index so it cannot be traded directly, but you can trade VIX based products like ETFs, ETNs, and options and futures.