We can apply the same concepts of adjusting for volatility measures to trading strategies. Momentum or trend-following strategies can use changing volatility to dynamically change the time period parameters used in the moving averages, or change the thresholds for how many up/down days to count as an entry signal. Another area of improvement would be using changing volatility to dynamically adjust thresholds on when to enter a position when a trend is detected, and dynamically adjust thresholds on when to exit a position when trend reversal is detected.

For mean reversion based strategies, applying volatility measures is pretty similar. In this case, we can use dynamically changing time periods for moving averages, and dynamically changing thresholds for entering positions when overbuying and overselling is detected, or dynamically changing thresholds for exiting positions when reversal to equilibrium prices are detected. Let's explore, in the rest of this chapter, different ideas of adjusting for volatility measures in trading strategies in greater detail and see the impact on the trading strategy behavior.