Hi, I'm Riskcuit and I trade Forex.
Below is the lens I use to monitor the market and find the pairs I want to trade.
The data below is for the 1-hour timeframe.
How I Trade Kurtosis
Looking at the data above, it is very apparent that we are dealing with fat-tailed distributions that have persistent excess kurtosis and little to no skew.
In order to take advantage of this excess kurtosis, I trade a box breakout strategy, using levels determinted by the distribution's standard deviation.
It is clear in the data above that the 1 SD levels aren't reached as much as they should be in a normal distribution and the 3 SD levels are reached WAY more than they should be in a normal distribution.
This is why I use the 1 SD and 3 SD levels to form a box that I am looking for price to break out of. At the start of a new setup, these levels are marked and if price exceeds the 1 SD level in either direction, I will be looking to trade that continatuon to the 3 SD levels.
Although these levels are drawn using the standard deviation of a single candle, these levels do not reset at the start of each candle. The levels drawn at the start of a new setup remain until price has broken out of the box.
The goal of each setup is to capture the 2 SD sized move that will inevitably occur as price eventually breaks out of the box, stategically managing your risk along the way. The last thing you want to have happened is getting chopped to bits trying to capture that move when the market is churning in place in a tight range. You want to avoid these periods of contracting volatility at all costs, and focus on trading when volatility is expanding from one of these periods.