Kaufman Volatility is a free mt4 (Metatrader 4) indicator that measures and displays market volatility in a sub-trading window.
The indicator can be used as a standalone trading tool or as an additional market volatility filter that works together with an existing strategy or system.
How it works:
- High indicator readings indicate high market volatility.
- Low indicator readings indicate low market volatility.
The indicator works equally well on all currency pairs (majors, minors, and exotic) and shows promising results if used correctly.
Free Download
Download the “kaufman_volatility.mq4” indicator for MT4
Indicator Chart (EUR/USD M5)
The picture below shows the Kaufman Volatility mt4 indicator in action on the trading chart.
Trading Tips:
Feel free to use your own favorite trade entry, stop loss and take profit method to trade with the Kaufman Volatility Forex indicator.
As always, trade in agreement with the overall trend and practice on a demo account first until you fully understand this indicator.
Please note that even the best trading indicator cannot yield a 100% win rate over long periods.
Indicator Specifications & Inputs:
Trading Platform: Developed for Metatrader 4 (MT4)
Currency pairs: Works for any pair
Time frames: Works for any time frame
Trade Style: Works for scalping, day trading and swing trading
Input Parameters: Variable (inputs tab), color settings & style
Indicator type: Volatility
Does the indicator repaint? No.
Kaufman Volatility + COG RSI Histogram MT4 Day Trading Strategy
Intro
This MT4 day trading strategy uses the Kaufman Volatility indicator to judge market strength and the COG RSI Histogram to provide directional bias.
High readings on the Kaufman indicator suggest strong activity. Low readings suggest quiet or range conditions.
The COG RSI histogram above zero favors buys. The histogram below zero favors sell trades.
The idea is simple. Only take trades when volatility supports the histogram signal.
That way, you filter weak moves and focus on trades with momentum behind them.
The strategy works best on M5 to M30 charts.
Trade during the London and New York sessions for clearer moves.
It suits traders who like disciplined entries and clearly defined risk.
Buy Entry Rules
- Kaufman Volatility is rising or at a high level.
- COG RSI Histogram is above zero and ideally moving higher.
- Enter on the close of the first bullish candle after the histogram crosses or confirms above zero.
- Place a stop loss a few pips below the most recent swing low or use a volatility-based buffer from Kaufman.
- Set initial take profit at 1.5x to 2x the stop distance. Optionally, trail the stop to capture extended moves.
Sell Entry Rules
- Kaufman Volatility is rising or at a high level.
- COG RSI Histogram is below zero and ideally moving lower.
- Enter on the close of the first bearish candle after the histogram crosses or confirms below zero.
- Place a stop loss a few pips above the most recent swing high or use a volatility buffer from Kaufman.
- Set initial take profit at 1.5x to 2x the stop distance. Use a trailing stop when the move extends strongly.
Advantages
- Filters out low-volatility noise and false signals.
- Combines directional momentum with a volatility strength check.
- Easy to read and apply in real time.
- Flexible across major pairs and common intraday frames.
- Works well with a small, defined risk per trade.
Drawbacks
- May miss early breakouts if volatility has not yet expanded.
- Signals can flip quickly in choppy conditions.
- Requires discipline to avoid trading when Kaufman is low.
- Performance depends on session liquidity and spread costs.
Case Study 1 — EURUSD M5 London Open
At the London open, volatility began to rise. Kaufman showed higher readings for several candles.
The COG RSI Histogram crossed above zero and continued upward.
A buy was entered on the next candle close. Stop loss sat below the recent swing low.
The target was 1.8 times the stop size.
The pair ran in a steady leg for the next hour. The trade hit take profit with a clean risk reward.
The volatility filter prevented earlier entries when the histogram briefly touched zero without follow-through.
This trade shows how waiting for volatility and histogram alignment improves odds.
Case Study 2 — GBPUSD M15 Midday Retracement
During the New York midday session, GBPUSD pulled back before dropping. Kaufman readings rose again as the market re-engaged.
The COG RSI Histogram dropped below zero and strengthened.
A short was entered at the close of the confirming bearish candle.
Stop loss was placed above the swing high. The target was 2 times the stop.
The move accelerated, and the trade reached its target after a strong leg down. A trailing stop captured more profit when the trend extended.
This example shows how using Kaufman to allow only active conditions helps capture larger intraday swings.
Strategy Tips
- Only trade when Kaufman shows rising or elevated readings. Ignore signals when Kaufman is flat.
- Wait for the histogram to cross and then confirm with a candle close. Avoid entering on small wicks or spikes.
- Adjust stop sizes per pair volatility. Volatile pairs need wider stops and larger targets.
- Be aware of the spread and commission.
- Use small position sizes while testing. Aim for a consistent edge over many trades.
- Consider partial exits and trailing stops to protect gains during strong moves.
- Backtest across multiple months and sessions to find the best parameter ranges.
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Download the “kaufman_volatility.mq4” indicator for Metatrader 4
