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Adam,
Welles Wilder wrote the book on ATR as he did on almost all the other
tried and true indicators, but that was in pre-computer days, so he used
a smoothing method that was (relatively) simple to calculate by hand.
See 'New Concepte in Technical Trading Systems' by J. Welles Wilder,
1978, Section 3 'Volatility', p.23.
For an ATR(7) he would start by summing the True Range for the first 7
days and divide by seven. For day 8 and all subsequent days he would
take the previous day's value times six, add the current day's value,
and divide by seven. (Prev * 6 + ATR(1)) / 7.
I see no advantage in using ATR Classic. As long as we are consistent,
and define what we are doing, we can use whatever we wish. I'm sure
Welles Wilder would use a different method today.
HHP
===================
Adam Hefner wrote:
>
> Ian,
> You are very correct!! After reading your mail, I decided to find
> out what is going on.... below is the code I used:
>
> r1:=H-L;
> r2:=H-Ref(C,-1);
> r3:=Ref(C,-1)-L;
> At:=If((r1>r2) AND (r1>r3),
> {then}r1,
> {else}If(r2>r3,
> {then}r2,
> {else}r3));
> At;
>
> The value of "At" comes up with the exact value of ATR(1), indicating that
> the "True Range" calculation that Equis uses is correct... so I have no Idea
> what kind of averageing method Equis uses to plot there ATR!!!! I may
> start using the MOV( ATR(1), 14, S ) after this discovery.
> Thanks for sharing your findings!
>
> Adam Hefner
>
> ----- Original Message -----
> From: "Ian Burgoyne" <iburgy@xxxxxxxxxxx>
> To: <metastock@xxxxxxxxxxxxx>
> Sent: Saturday, July 15, 2000 11:15 AM
> Subject: Re: atr
>
> > Adam,
> > I've come across this before with comparing the ATR to a moving average of
> > the ATR and found them to give different values. See attached chart which
> > gives an example.
> > In the data window shown (in red type)the top value is mov(atr(1),10,e)
> and
> > the value underneath is mov(atr(1),10,s) and the bottom value is
> > atr(10). I think the "average" in the ATR calculation is a different
> method
> > at least in comparison to an EMA and SMA.
> >
> > regards...Ian
> >
> >
> > >From: "Adam Hefner" <vonhef@xxxxxxxxxxxx>
> > >Reply-To: metastock@xxxxxxxxxxxxx
> > >To: <metastock@xxxxxxxxxxxxx>
> > >Subject: Re: atr
> > >Date: Fri, 14 Jul 2000 08:00:57 -0500
> > >
> > >Al,
> > > If you used a ATR(1) and then plotted a 10 day simple moving average
> > >of this ATR(1)..... it should calculate the same value as an ATR(10).
> > >Now if you needed an "Exponential ATR" you could plot a 10 exponential
> > >moving average of ATR(1).
> > > I believe this is what the previous ( Mike) e-mail was trying to
> show.
> > >
> > > Adam
> > >
> > >
> > >----- Original Message -----
> > >From: "Al Taglavore" <altag@xxxxxxxxxx>
> > >To: <metastock@xxxxxxxxxxxxx>
> > >Sent: Friday, July 14, 2000 3:10 AM
> > >Subject: Re: atr
> > >
> > >
> > > > ATR(1) would simply be the true range for one day. I fail to see the
> > >value
> > > > of taking an "n" day moving average of one day. I am looking for the
> > > > average true range of price over "x" period of days....what is the
> > >average
> > > > price movement for the past 10, 50 day period. If, as is the case for
> > >WMT,
> > > > the 10 day ATR is 2 2/16, and the 50 day ATR is 2 7/16, after price
> > >has
> > > > moved, during the trading day, 2 points, I would anticipate little
> > >reward
> > > > to buy the stock as I could only presume a futhur movement of 2-7
> > > > sixteenths. If however, the stock fell 2 1/2 points, I have a low
> risk
> > > > entry point for a countertrend trade. If I owned the stock from a
> lower
> > > > price point, after the 10/50 day ATR is reached I have a good exit
> point
> > > > for my day trade.
> > > >
> > > > Al Taglavore
> > > >
> > > > ----------
> > > > > From: Bob Jagow <bjagow@xxxxxxx>
> > > > > To: metastock@xxxxxxxxxxxxx
> > > > > Subject: RE: atr
> > > > > Date: Thursday, July 13, 2000 8:28 PM
> > > > >
> > > > > Right. The Equis ATR(period) matches Wilder's original version and
> the
> > >TR
> > > > > isn't a builtin.
> > > > > ATR(1) is actually the TR so taking its ma will give SMA or EMA
> > > > versions
> > > > > of ATR -- Chande uses the SMA for stops.
> > > > >
> > > > > Bob
> > > > >
> > > > > -----Original Message-----
> > > > > From: owner-metastock@xxxxxxxxxxxxx
> > > > > [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of Mike Campbell
> > > > > Sent: Thursday, July 13, 2000 2:18 PM
> > > > > To: metastock@xxxxxxxxxxxxx
> > > > > Subject: Re: atr
> > > > >
> > > > >
> > > > > Al Taglavore writes:
> > > > >
> > > > > > Neither. As Welles Wilder developed it, a moving average was not
> > >used.
> > > > > > MetaStock has it programmed. Simply pull up the indicator and
> type
> > >in
> > > > the
> > > > > > number of days. Today's ATR is the distance from today's low to
> > > > today's
> > > > > > high OR from yesterdays close to today's high.....whichever is
> > >greater.
> > > > > > This accounts for any gaps from the previous close to the low of
> the
> > > > > > current day.
> > > > >
> > > > > I believe you are mistaken there. What you described is the "true
> > > > > range" calcuation. ATR is some moving average of THOSE values.
> > > > >
> > > > > Otherwise, what would the "number of days" have to do with it?
> > > >
> > >
> >
> > ________________________________________________________________________
> > Get Your Private, Free E-mail from MSN Hotmail at http://www.hotmail.com
> >
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