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With regard to ATR, neo commented:
> The problem results when moving from yesterday's last bar close to today's
> open bar low or high. If there is a large gap up or down from yesterday,
it
> distorts TR. It appears that the distance from yesterday's close to
today's
> high or low should be excluded.
Maybe I've missed the point of your message, since I have not
really been following this threat, but that was kind of the whole point
about ATR--to take into account the gaps that a standard range
indicator misses. The theory being that by capturing those gaps,
ATR more accurately reflects price movements.
If ATR has a defect, it's that it doesn't go far enough. Logically,
if you have seven days of limit moves, it should display them all
as a single price change, including the less-than-limit move that
ends the streak. That is not easy to do, however.
Granted, this might not be convenient for day trading, but ATR
was designed for interday use, with days of limited length and
limits to the daily price movement. In day trading, apparent gaps
almost always result from the length of the bar, rather than from real
voids in the price movement. Same with 24-hour trading, when
there is enough late-night volume to provide an orderly market.
It sounds like whatever problem you are trying to solve comes from
trying to apply ATR to the wrong kind of trading, rather than any
defect in ATR itself.
Owen Davies
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