All language subtitles for 3. Average True Range (ATR) Indicator

OK, let's look at an indicator that you can use to start measuring this volatility and seeing how we

can use it to our advantage, and one of the real popular ones, kind of a long time classic ones,

is the 8R or average true range indicator.

And it's really a way of looking at volatility is looking at the averages of the highs and lows such

as this, with highs and lows over a period of time, which, as we know, is our trading range.

Our high and our low is the range of our prices that are going in a trading range.

And we're looking for a range expansion where the range gets bigger or range contraction.

So what's happening here when those things happen?

So range expansion, because, you know, if we start here and all of a sudden it starts getting larger

or wider, that expanding the range expansion for our low price to our high price, you know, the highs

and lows are getting further apart.

And that's an indicator that volatility is rising.

It's not trading in a narrow price range.

It's now got a wide price range from low to high.

So that volatility and that more movement up and down between can be rising volatility rising again,

providing us higher reward with potential, more risk, with a lot more trading options in between those

highs and lows over a period of time.

By the opposite of that, a range contraction would be highs and lows are getting closer together.

Right.

So volatility is reducing.

There's less trading options or choices within the narrow range of prices.

So, again, that's where we can use this year to see a measure like what is happening here.

How volatile is the market by looking at an average range indicator that you can you can choose as an

overlay on your trading platform, we automatically calculate it for you.

So if we look at an example here, here's an example with Tesla and you can see we have a line moving

right, left to right.

That's time, you know, old time to newest time.

And you'll see it's got a measure here.

And this is looking over 14 days.

That's a standard as far as 14 days.

You can change that, though.

But let's say you're looking at a standard 14 days and they'll give it a number like this is thirty

six point eight three for a Tesla at this period of time.

It was thirty six point three.

To give you a comparison.

And this is a very volatile stock, right?

We know Tesla is a very highly traded, highly volatile stock wide range of highs and lows.

If we compare that to, let's say, Xcel Energy, which is a utility company, you know, pretty narrow

range of trading.

That's eight hours or more, actually more common.

And it is lower at one point zero.

So if you're wondering if you're looking at a particular security and you're saying, is this a real

volatile security, while the chart will show you a little because you see these peaks and valleys.

But you can also look at the numbers, the raw numbers and say, oh, gosh, regular old utilities like

we're on one point for this is at a thirty six point eight.

Now, you could compare that to, let's say, other stocks, like a technology stock like Apple or whomever

or Facebook or whoever we want to look at.

And some are more volatile than others.

Some are more, Walter, than Tesla, for example.

So we look at the top part here.

That's our average true range indicator.

And basically you can see the peaks and valleys as you go up and down and how that kind of matches up

towards the prices on the bottom.

You can see we've got our candlesticks and we've got volume wandering along the bottom as far as our

trading volume.

So what is this telling us now?

Let's let's let's look at this a little closer and what is this actually telling us?

So you can see over in the let's start on the far left, you can see that there's lower volatility,

at least relatively low volatility in comparison to stock.

And you can see what's happening with the prices down below.

They're not going up or down very much.

Right.

There's not much, you know, trading volumes, OK, but not super high.

But it's but it's there's not a lot going on.

There is a little steady, maybe a little bit downward.

Right.

But then there's our line to change our average to range.

It starts to change and start going up on the upswing.

You can see that with the blue there, blue boxer in the bottom, the range expansion.

We're also seeing a definite price trend coming to here as well.

Again, we're looking for when things might turn or how strong a trend is.

So once it starts picking up, our experts telling us there might be a turn happening.

You can see the range is expanding up on the top there.

But also our trend is now going up in the upper right.

The trend is now headed upward, too, as well.

And our volume picked up, too, which is another really confirming indicator that something is going

on here.

And as we hit the top of that, that's where our risk and reward kind of comes from.

You know, you can you can kind of see it's still kind of moving up.

The eight still very volatile and then the 8R keeps going up because the the stock price actually went

down, as you can see on this one.

And in our ATRA, still showing a rising thing because there's still a lot of volatility both up and

down.

Right.

So you have to kind of be aware of that a little bit, too, as far as, you know, maybe not using

this as a prime indicator, looking at your other indicators, too, on the strength of those trends.

And then it kind of peaks out there at the top, looks almost like a volcano.

And we have this reinsurance contracting.

You know, it's narrowing.

It's getting less volatile over a period of time here.

See how it's it?

It's a little bit lagging indicator.

It doesn't do it immediately.

You can.

See, but over time, how that that line starts to come down in the top to match up with that kind of

narrow range in there, the yellow or orange type box where it's less volatility, and then again,

it picks up with the range expanding again and you start seeing more volatility going up there.

Do you see a spike in volume there, kind of corresponding to a little bit of a spike in our 8R at the

top?

And it's all part of an expanding range there, too.

So you can kind of see how, you know, volatility can give you some insight into this.

As far as what might be happening.

Again, I prefer I would recommend that you're using this as more of a confirming indicator versus a

primary indicator that you use.

And you might use it with something else to show.

Like let's say I'm in the middle of that contracting, that narrow trading range there.

And I want to confirm that I'm kind of in this narrow trading range that I'm there's less volatility.

I can look at that ETR and see where it's coming off a peak and I can see things are getting less volatile.

Might not have reached a turning point yet and certainly not at a peak or anything of that nature.

But I think there's better ones that we're going to talk about here.

And one is the Bohlinger and I think is actually more visually instructive and appealing, helpful and

but atras, very popular.

So it's good to know about ETR and that average try range, and that can be very helpful as well.

So I don't want to knock it.

I just want to say I like this other one a little bit better to look at volatility.

So let's talk about that.