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John,
To me one of the best use's of ATR is in the calculation of the Keltner
Bands (see Oct issue of ADTrading at www.adtrading.com). The breakout
strategy that Tim referred to was central to Keltners original work on
bands. (His book is out of print I believe so I am basing my comment on
second hand information). ATR gives a better (and more stable) handle on
where short or longer term extremes can be expected than say standard
deviation. A number of the points that Tim brought up can be illustrated
by applying Keltner channels to the price action. For example Mark Browns
comment that price can move more violently as a move ages could be seen
with a spike outside the Keltner which I will often use as an exit (or
"watch out!") signal. Also I concur with Tim's point that ATR does not
change much with trend age or direction which is why I use them as the most
"stable" bands in my trading as compared to say Bollingers which I find far
too erratic to give me much insight.
BTW Gerbers Apricot is still going strong. My daughter would eat the
stuff by the bucket if the bucket was not bigger then she is!! Personally
I recommend the Chiquita banana.
regards
Philip
P.s. I should mention that I also use it as a measure of volatility and
risk in day trading the S&P. The 20 bar average ATR is a good indicator
to gauge whether a target is realistically going to be achieved and perhaps
more importantly whether the distance to the stop is more risk than you
should be taking under current market conditions.
>
> Thank you Tom...after making comparisons of price moves in Spx -- VIX
> and
> the ATR I realized that volatility was the measure. At first look you
> expect it to be like an Moving Average or behave like an Oscillator. It
> is
> really quite interesting. I now will be more properly using the ATR and
> keeping an eye on that volatility at the pivots.
>
> Once you get a handle on this, I can see how Timothy Morge's post on
> this
> topic can be applied. Also Dennis...thanks,for your insight on the
> topic. You comments were also worth noting.
>
> I think I'll go out and buy a small jar of that Gerber's Apricot and a
> small spoon
> ..... just to remind me I'm still learning. They still make that
> stuff??
>
> have a good day
>
> John
>
>
> Tom Lisk wrote:
>
> > <<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????>>
> >
> > John:
> >
> > ATR is a measure of volatility not market direction.
> >
> > Tom Lisk
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