Published By TradeSmith Customer Success
This is a commonly asked question from our members.
Let’s start by reviewing the Health Indicator. The Health Indicator is a comprehensive indicator designed to tell you the health of a position at a quick glance. Think of a traffic light signal (green light, yellow light, red light system).
When a position enters the Red Zone, the Volatility Quotient comes into play.
The Volatility Quotient, or VQ%, tells you how volatile a position is — in other words, how much room you can give a position as to not get stopped out too early.
Here’s the breakdown of risk percentages:
THE DIFFERENCES BETWEEN THE HEALTH INDICATOR AND VQ TRAILING STOP IS AS FOLLOWS:
The Health Indicator tracks the position’s volatility quotient from the most recently detected highest close price.
The VQ Trailing stop tracks the stock’s volatility quotient from the most recently detected highest close price on or after one’s listed entry date.
The Health Indicator will not widen or lower its trailing stop loss should the volatility quotient increase over time.
The VQ Trailing Stop will widen or lower its trailing stop loss should the volatility quotient increase over time.
Bottom line, the Health Indicator is the more comprehensive and conservative of our indicators. Not only does it tell you at a quick glance the health of the position, it tracks the position’s volatility quotient from a most recently detected highest close price. It even has a re-entry feature.
So not only does the Health Indicator warn you when it may be time to step aside, it will also alert you when a position has triggered an entry signal.