Indicators of volatility
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    Indicators of volatility

    Another group of indicators – indicators of volatility. As you understand from its name, this indicator somehow measures volatility of price action.The most popular indicator of volatility is Average True Range (ATR).

    Use can see sample on the chart below:


    Picutre 1.

    On the picture above you can see daily EURUSD chart with ATR(5) indicator. It means that parameter of this indicator is equal to 5.

    Curve of the indicator goes up when volatility increases and goes down when it decreases regardless of destination of current trend – bullish or bearish. ATR is used for indentifying market conditions. Compare relative movements of indicator curve and price chart. When candlesticks become smaller, value of indicator decreases. The lower volatility, the lower value of ATR you will see.

    «True Range» is calculated from 3 parameters:

    • difference between current high and low
    • difference between previous close and current high
    • difference between previous close and current low


    Average True Range (ATR) is equal to moving average applied to «True Range» Parameter of ATR shows quantity of periods (candlesticks) calculated.

    If indicator curve is located lower, volatility is considered to be low, if higher – volatility is high. Notice that this indicator does not show destination for your trades, like oscillators do.
    ATR is applicable for estimating current market conditions.

    Every indicator of volatility has its advantages and drawbacks. You should use those corresponding to your needs and tasks.

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    As a point of note, ATR is very good for this work, If these three condition (difference between current high and low difference between previous close and current high, difference between previous close and current low) can be met as RoboForex Trader as rightly said, there is no how that the market can fake you again on this, although it will not help you to get the trend, but it might help you to take more profits and knwo when the market is very active.

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    Quote Originally Posted by cozard007 View Post
    As a point of note, ATR is very good for this work, If these three condition (difference between current high and low difference between previous close and current high, difference between previous close and current low) can be met as RoboForex Trader as rightly said, there is no how that the market can fake you again on this, although it will not help you to get the trend, but it might help you to take more profits and knwo when the market is very active.
    This indicator, like any other, can't alone make your trading profitable. It just shows current market conditions. It shows what volatility market has shown during recent period. It doesn't show direction of the price.

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    Trader rinaji's Avatar
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    I just look like there are similarities with the volume indicator. Or is there a difference? Actually I just saw this indicator function to identify the strength of a trend in the market. Is it true? from my understanding this indicator can be used to determine the beginning and end of the trend by observing the increase and decrease of the volume range.

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    Quote Originally Posted by rinaji View Post
    I just look like there are similarities with the volume indicator. Or is there a difference? Actually I just saw this indicator function to identify the strength of a trend in the market. Is it true? from my understanding this indicator can be used to determine the beginning and end of the trend by observing the increase and decrease of the volume range.
    I will give my answer.

    Volatility is ability of price to perform rapid moves in short period of time. Volumes in MT4 reflect quantity of trades executed. You may have big volumes but low volatility

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    just saw this indicator function to identify the strength of a trend in the market. Is it true? from my understanding this indicator can be used to determine the beginning.Is it just shows current market conditions?

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    ATR is different from Stochastic right?I have a question, how to use ATR as our refferenc in opening position?can you give me example?

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    Yes! Even i use the AVERAGE TRUE RANGE indicator to know about the particular pair volatility but with the default setting. ANd also , i use the VOLUMES as well, as it helps me to know whether the market is trending up or going down. So these 2 indicators, helps me a lot to know about the volatility of a certain pair.

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    Apart from this ATR, another indicator which is popularly used to partially detect volatility is the bollinger band. Whenever there is a tightening of the outer bollinger bands price will always be expected to make a volatile movement

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  10. #10
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    I like to use naked chart with the average truth range. ATR is shoing us high low from specific time frame, and is really important technical indicator. I am using this indicator to identify entry signal for contra trend. If for example ATR on a daily basis is 80, I am wait for a specific pair to high low is reach 80 and i enter in opposite trend.

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