๐ Volatility Indicators
Volatility indicators measure the dispersion of price around its recent path โ how wide the "normal" range of movement has become, regardless of direction.
๐ก What This Group Measures
None of these indicators tell you whether the price will go up or down. They tell you how much it might move, which is essential for position sizing, stop-loss placement and detecting the calm-before-the-storm "squeeze" pattern that often precedes a breakout.
๐ Indicators in This Category
| Indicator | What It Measures | Key Use | Details |
|---|---|---|---|
| Bollinger Bands | Statistical envelope (mean ยฑ \(k\sigma\)) | Squeeze โ breakout detection | ๐ |
| ATR | Average true range, in price units | Stop-loss / position sizing | ๐ |
| NATR | ATR normalised by price (%) | Comparing volatility across assets | ๐ |
| Donchian Channels | Rolling highest-high / lowest-low envelope | Breakout systems (Turtle Trading) | ๐ |
๐ฅ Data Requirements
| Indicator | Inputs | Notes |
|---|---|---|
| Bollinger Bands | close |
Standard deviation of the close over the window |
| ATR / NATR | high, low, close |
Built on the True Range, which needs the previous close |
| Donchian Channels | high, low |
Pure extrema tracker, no averaging |
๐ Comparison Table
| Indicator | Default Period | Output Units | Envelope Shape |
|---|---|---|---|
| Bollinger Bands | 20 (ร2ฯ) | Price | Statistical (mean ยฑ ฯ) |
| ATR | 14 | Price | Single line (no envelope) |
| NATR | 14 | % of price | Single line (no envelope) |
| Donchian Channels | 20 | Price | Extremal (highest-high / lowest-low) |
flowchart LR
C["๐น Close"] --> BB["๐ Bollinger Bands (ฯ envelope)"]
HLC["๐ High / Low / Close"] --> TR["๐ก๏ธ True Range"]
TR --> ATR["๐ก๏ธ ATR"]
ATR -->|"รท close ร 100"| NATR["๐ NATR"]
HL["๐ High / Low"] --> DON["โ๏ธ Donchian Channels"]Absolute vs relative volatility
ATR and Bollinger Bands report volatility in the asset's own price units โ comparing a โฌ5 ATR on a โฌ50 stock with a โฌ5 ATR on a โฌ500 stock is misleading. NATR solves this by expressing the same information as a percentage, making cross-asset volatility screens meaningful.
๐ Related
- ๐ All Indicators โ Full catalogue with financial and signal-processing views
- ๐งญ Trend Indicators โ Direction of the move volatility surrounds
- ๐ฆ Volume Indicators โ Confirmation via trading activity