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John:
Ahhh...free from the diaper brigade for a few minutes.
Ok, let's see. I'm not a systems trader, but I use the ATR for a few things. The
average true range tells you how large of a range the given commodity has
experienced [taking into account gap openings as well as the high and lows] over
some number of days. I use it to decide how many contracts to trade per XX
amount of money in my account, but you can also use it as a trigger either to
enter a position [for example, when the commodity moves in one direction better
than 1.5 X the average true range, enter a position in that direction] or you
can use it to decide where to set stops [I do this at times and I put a stop at
something like 1.5 XX the average true range of the commodity from the current
price when I don't have a better place to put a stop].
As Dennis posted, sometimes the commodity you are trading has a tendency to
higher volatility in a specific direction [stocks may]. And as Mark Brown stated
a few days ago, often commodities have a tendency to move more violently as a
move 'ages.' In any case, the ATR doesn't always get larger as a trend
developes, nor does it get smaller as a trend ends--I would guess here that over
time, you'd see the ATR doesn't change based upon either a directional move or
strength of trend.
The germ of the idea for a volatility based entry, like the ATR volatility
trigger, is that an abrubt change of volatility usually flags the beginning of
new move. A similar concept would be the small range day showmes that were
posted here a few months ago [I can't remember the correct name for them, NRB7?]
and what a trader is trying to do here is identify narrow ranges over a few days
that will likely be unsustainably small ranges, and be ready with orders to
position himself for a likely breakout move.
John, I think this should answer your question, but if it doesn't, take another
try at asking...I may be slow because of all the baby talk over the past few
weeks.
Best,
Tim Morge
joachim@xxxxxxxxxxxx wrote:
>
> I ran the AvgTrueRange Indicator on my chart with the 'Phil Lane System'
> posted Friday.
>
> The 'Phil Lane System'.... just to set the ground work. Combines both
> elements of Chuck LeBeau's web site 'Tool Kit' located at
> http://traderclub.com/ This is the first time I have seen someone
> take the time to code in the ATR Volatility trigger and the Chandelier
> Exit, and this works very well on SPX data. I suppose that 'code
> vendors' will claim that they use it 'all' the time....I have not seen
> an evidence of this ..yet.
>
> Maybe I haven't seen their code. It's not a big issue with this Do-it
> -yourselfer.
>
> What is important, is that we have a working sample of this in
> code...... obviously with a little effort other studies and enhancements
> can be written around those two features.
>
> Back to the ATR... this indicator seems to run out of sync with the
> price data. Price goes up (in swings) and the ATR trends downward.
> Next chart...Price charting is going downward (in swings) and the ATR
> is trending upward..... occasionally ATR moves in the same direction as
> the price swing. What gives????
>
> I remember Timothy Morge and a few of the longer term list members
> having a chat about something like this several months back.... but I
> couldn't relate to the information back then. To day my eyes are Bug
> Eyed at the finding. I don't know....... do you think the guy would
> have enough time between diaper changes (every 2-3 hrs if I remember)
> and bottle feedings ( about the same time frame) to give us a little
> information on this. Or .....maybe.....someone else can take a shot at
> this......
>
> John
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