JFC Cluster Volatility Stop Indicator Manual

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The JFC Cluster Volatility Stop Indicator is a combination of the features of the JFC Cluster Indicator and an adaptation of the JFC Volatility Stop Indicator.

This indicator can be used to define both an entry point and a trailing stop which can be used for an exit routine.

The entry routine is the exact same sequence which is used to calculate the JFC Cluster Indicator. The large Magenta and Cyan dots which are plotted by this indicator are exact duplicates of the signal dots placed by the JFC Cluster Indicator.

The trailing stop begins plotting as soon as the JFC Cluster portion of this trading tool has indicated a buy or selling opportunity. By closely observing the placement of the plots which follow, the trader is able to place a protective trailing stop behind the position, thereby progressively either reducing the risk being assumed by the trade or locking in sequentially higher profit levels.


There are three inputs for this indicator as identified in the image on the prior page. The first two inputs, Fac and ATRLen, regulate the relative rate at which the trailing stop feature of this indicator “closes in” on the price bars.

The Fac input will accept decimal inputs. Users are encouraged to experiment with a range of decimal settings for this input in order to define an acceptable trading strategy.

Only integer, or whole number inputs may be used for the ATRLen input. Decimal settings used here may produce unpredictable results.

Generally, the larger the values for both of these inputs the slower will be the progression of the trailing stop plot toward the price bars. Traders who take a longer term approach to trading their market of choice will use these larger values.

The particular settings of 4 and 10 as demonstrated in the  Setup Screen image, are at the lower end of settings that could be used for longer term time frames.

The benefit of using the longer term approach is the increased likelihood of maintaining a larger profit for each trade, thus taking advantage of the trading axiom, “Let Your Profits Run”.

The downside is that the stop, as a general rule, will be maintained at a greater distance from the actual price bars and will move closer to the bars at a slower rate, thus increasing the possible loss on the position should the stop be activated by market action.

The trade off here is much the same as with any trading scenario, the possibility of increased profits which are gained by the longer term positions carries with it the risk of a somewhat larger loss since the maintenance of the long term position requires the use of a larger, more distant stop.

Such a trading strategy, properly designed and implemented, would be expected to produce a lower percentage of winning trades with a higher per trade profit. This strategy is more applicable to a less volatile futures contract or stock issue and one in which the trader is expecting a longer term, steady, trending market move.

Conversely, lower values for the inputs of the JFC Cluster Volatility Stop Indicator will move the trailing stop plot toward the price bars at a more rapid rate.

The advantage to a more rapidly moving volatility based trailing stop is that the protective stop will move more quickly to reduce the risk being assumed by the position and eventually lock in progressively higher profit levels as trading progresses.

This strategy is designed to more closely fit the attitude and trading style of the more aggressive, scalping type trades being used today by short to ultra-short term day traders operating in the volatile stock market index markets and very active, high value internet stocks. Since these markets have the ability to quickly move against the position of the trader it is often advantageous to have a protective situation forming on your chart which will quickly reduce the risk associated with the current position.

The obvious downside to this shorter term trading strategy is the possibility that new positions can be quickly exited if the market makes only a slight corrective move against your position.

These short term corrections against the dominant trend can be brief, but abrupt and violent enough to stop out a position if the trailing or protective stop is too close to the market.

The key to successful trading utilizing this shorter term trailing stop strategy lies in the formulation of an input combination for the JFC Cluster Volatility Stop Indicator. In other words, placing a stop, which will produce the desired protective strategy without resulting in an excessive rate of stop outs which result from minor corrections in the market.

As this setup will vary markedly both with the market and the individual trading strategy of the user, considerable research will be necessary. The trader will find it necessary to examine considerable historical data, adjusting the inputs for the indicator until an acceptable setting is found.

The last input, Plt, as with the JFC Cluster Indicator, regulates the distance from which the large Magenta and Cyan dots are placed from the price bars.

It is important to note here that the Plt input has no bearing whatsoever on the placement of the trailing stop portion of this indicator. The placement of this feature is totally directed by the values entered by the user for the first two inputs on the screen below.


There are four separate plots active for this indicator, as noted above.

The CL Buy and CL Sell plots are identical to the JFC Cluster Indicator.

The LongStop and ShortStop color selections will set the color for the trailing stops which form after the placement of the Buy and Sell plots appear. The colors for these plots is defaulted to the same color as the large Buy and Sell dots, or Cyan and Magenta. By using the style settings as shown on the prior page, the user has the ability to set the trailing stop plots to colors other than the color of the Buy and Sell dots if a different color combination enhances one’s ability to interpret these two plots.


The scaling tab for this indicator must be set to Same as price data for an effective plot to appear on your trading screen.


This indicator must be placed in Subgraph One, as indicated on the next page. There are no alerts programmed into this indicator.

It is not usually necessary to update this study with every tick. Since the Cluster portion of this program is quite processor intensive, doing so could significantly reduce your computer’s performance.


The following chart is an example of the JFC Cluster Volatility Stop Indicator as applied to a two-minute chart of E Bay.

Note that the trailing stop portion of the indicator begins plotting with the large dots and terminates its activity when the price bars intercept the trailing stop plots.

The proper use of this tools means that the trader would place the exit stop at the level indicated by the indicator’s trailing stop.

Close observation of the plots of this indicator and those from the JFC Volatility Stop Indicator will reveal that the trailing portion of the JFC Cluster Volatility Stop does not “back away” from the market in response to increasing volatility as does the trailing plot generated by the JFC Volatility Stop Indicator.

This is an intentional feature and not a programming error. Since the JFC Cluster Indicator is more often used in this format on the higher risk markets, we feel a more aggressive trailing stop routine is more appropriate in these situations. 

The next chart is a 5-minute chart of Nextel Communications. It is illustrative of the use of the JFC Cluster Volatility Stop Indicator over a relatively longer term perspective spanning several days.

Note that the major trade on this chart, just before the 12:45 time stamp of 3/08, was effectively maintained using the trailing stop as defined by our indicator. The position in this instance was maintained for the major portion of a three day period using a relatively short 5 minute time frame.

We encourage you to review the differences between the JFC Cluster Volatility Stop Indicator and the JFC Volatility Stop Indicator. Careful observation of the design differences of the two similar indicators will help you in determining which tool is best suited to your preferred market(s) and trading style.

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