|
PureBytes Links
Trading Reference Links
|
<x-html>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=iso-8859-1">
<META content="MSHTML 5.50.4207.2601" name=GENERATOR>
<STYLE></STYLE>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><SPAN class=840380312-07092000><FONT size=2>ATR is just like a thermometer
measuring a chart's temperature. By itself one ATR number tells you nothing, it
is when this number is put in the context of where it has been in the past on
the same chart that it starts having meaning.</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>By that definition,
</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>Low ATR helps you trade a
larger size (or keep a tighter stop on same size).</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>High ATR tells you that your
stops need to be wider (or trade a smaller size & expect frequent
stop-outs).</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>That is the trading
interpretation.</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>The conceptual interpretation
is that volatility reverts to mean, so periods of historically low ATR will
likely not be sustained. Likewise, when ATR has been rising and stops rising,
you can expect range contraction to continue - until it
doesn't.</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>But there are a multitude of
trading strategies and money mgt approaches that are built around the concept of
range expansion/contraction.</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>This is how it is
interpreted/used, at least, by me.</FONT></SPAN></DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=840380312-07092000><FONT size=2>In the book, he basically lists
the calcs as a precursor to building the ADX.</FONT></SPAN></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>Gitanshu</FONT><FONT
size=2></FONT></DIV></BODY></HTML>
</x-html>
|