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Here is a posting by Chuck LeBeau on ATR:
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In a message dated 9/7/00 3:07:07 AM Pacific Daylight Time,
sky40912@xxxxxxxxx writes:
<< Can someone of our experts explain me about the ATR ?
(of course i know what the ATR is measuring). >>
AverageTrueRange has all sorts of valuable applications. It can be used as
a
trend indicator (if the recent high is X ATRS above the low, the trend is
up), it can be used for setting risk control stops (exit at 2 ATRs below
entry price), it can be used to set profit objectives (take profit when
profit reaches 4 ATRs), it can be used as an entry setup condition (ATR must
be at least X dollars) or (ATR must not be greater than 125% of normal) and
so on.
I have lots of information on using ATR in the educational Bulletins that
are
archived on my traderclub.com web site. This information is free and can be
found at http://www.traderclub.com/discus/board.html (click on Bulletins,
there are 41 Bulletins archived there).
ATR can be very helpful because it allows systems to adapt automatically to
changes in market conditions and therefore helps to make systems more
robust.
ATR is a powerful tool with many uses. Hope this brief response helps
motivate you to investigate further.
Chuck Le Beau
traderclub.com
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Do visit his web site for more discussion of using ATR as a
volatility/trading indicator
Lionel Issen
lissen@xxxxxxxxx
----- Original Message -----
From: "Gary Funck" <gary@xxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Sunday, April 29, 2001 5:38 PM
Subject: RE: Volatility Index by Wilder jr.
> Welder's volatility index is essentially a short-term EMA (about 7 days)
of
> the True Range. It is worth noting when reading Wllder's work that
something
> he calls an N-day smoothed moving average we would now call an (N + 1)/2
day
> EMA. So, Wilder's fomulation:
> VSI = (13 * VSI[-1] + TR)/14
> is weighting the new value of TR by 1/14, and this works out to about a 7
> day EMA,
> by today's interpretation.
>
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