Minimum volatility filters
Posted: Sat Oct 31, 2026 9:07 pm
Some setups only work when the market moves. In a flat tape, targets are not reached, stops are not hit, and trades linger, paying costs and risking the next surprise.
A minimum volatility filter keeps the strategy off the table when conditions are too quiet. The measurement can be as simple as the range of the last fifteen minutes compared with its average.
The cutoff can be found by sorting trades by the volatility at entry and checking where expectancy turns positive. Often there is a clear threshold below which results are poor.
The filter has a side effect: fewer trades. That is fine. Quality over quantity is especially true when each trade has a fixed cost.
Be careful not to set the threshold so high that the strategy only trades during news, where execution is poor. The goal is avoiding dead markets, not selecting only wild ones.
Re-check the threshold periodically, since average volatility drifts over months.
How is quiet market conditions identified, and what does trading through them cost?
A minimum volatility filter keeps the strategy off the table when conditions are too quiet. The measurement can be as simple as the range of the last fifteen minutes compared with its average.
The cutoff can be found by sorting trades by the volatility at entry and checking where expectancy turns positive. Often there is a clear threshold below which results are poor.
The filter has a side effect: fewer trades. That is fine. Quality over quantity is especially true when each trade has a fixed cost.
Be careful not to set the threshold so high that the strategy only trades during news, where execution is poor. The goal is avoiding dead markets, not selecting only wild ones.
Re-check the threshold periodically, since average volatility drifts over months.
How is quiet market conditions identified, and what does trading through them cost?