I have been working on building an Indicator for TradeStation that places an ATR (Average True Range) Volatility Band on an Intraday Chart. This indicator may help me get a sense of what the probable trading range for the current day would be.
This seems to be working pretty well for me with the QQQQ's (and other major market indices), though may be less useful with individual stocks as they are much more subject to headline risk.
The key thing to having more confidence in the Bands, is to determine how far apart the bands should be. I had been tinkering with 0.5 increments (ie, 0.5, 1.0, 1.5 ATR's), Fibonacci increments (0.34, 0.55, 0.89, 1.44 ATR's) but this may not be that representative of probable ranges.
In the snapshot above, the upper graph has 3 ATR Volatility Bands (blue, magenta, cyan) around each days Intraday Chart. There is also Baseline (dark blue) for each day based on the previous day's Close. The lower graph has the Daily ATR (normalized by ATR/Closing Price), and an ATR moving average.
I am now thinking of using some kind of Standard Deviation calculation to have more confidence that the band width is based on something relevant (perhaps a Normal Distribution) as opposed to an aribtary band width increment of lets say 0.5 ATR's. Any suggestions on this would be helpful.
If anyone is interested in checking out this TradeStation based ATR Volatility Band Indicator, then let me know, and I will send it out to you when its fully coded, probably a week or so from now.
This seems to be working pretty well for me with the QQQQ's (and other major market indices), though may be less useful with individual stocks as they are much more subject to headline risk.
The key thing to having more confidence in the Bands, is to determine how far apart the bands should be. I had been tinkering with 0.5 increments (ie, 0.5, 1.0, 1.5 ATR's), Fibonacci increments (0.34, 0.55, 0.89, 1.44 ATR's) but this may not be that representative of probable ranges.
In the snapshot above, the upper graph has 3 ATR Volatility Bands (blue, magenta, cyan) around each days Intraday Chart. There is also Baseline (dark blue) for each day based on the previous day's Close. The lower graph has the Daily ATR (normalized by ATR/Closing Price), and an ATR moving average.
I am now thinking of using some kind of Standard Deviation calculation to have more confidence that the band width is based on something relevant (perhaps a Normal Distribution) as opposed to an aribtary band width increment of lets say 0.5 ATR's. Any suggestions on this would be helpful.
If anyone is interested in checking out this TradeStation based ATR Volatility Band Indicator, then let me know, and I will send it out to you when its fully coded, probably a week or so from now.
Posts
my response to a qestion from a fellow trader at the prop daytrading firm:
ReplyDeletegenerally speaking, i am using the ATR
volatility bands as pivots and looking for reversal signs off that pivot to
initiate or add to a stalk...
if i am already holding a position and it goes in my favor, then i am
looking to exit the position or lighten up as it reaches a higher band (if
long) or a lower band (if short)...
one of the things i like about the ATR bands is that often times, they do
not coincide with already established pivots on an intraday chart, so there
should be less competition for buying shares at a lower ATR band or
selling/shorting shares at a higher ATR band...
my response to a comment from a fellow member of a TradeStation User's group:
ReplyDeleteusing ATR as part of an exit strategy sounds good...as a matter of fact, for nearly all of my 25+ swing trading models, ATR is a variable in my money management stop calculation...