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OK, let's look at an indicator that you can use to start measuring this volatility and seeing how we
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can use it to our advantage, and one of the real popular ones, kind of a long time classic ones,
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is the 8R or average true range indicator.
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And it's really a way of looking at volatility is looking at the averages of the highs and lows such
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as this, with highs and lows over a period of time, which, as we know, is our trading range.
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Our high and our low is the range of our prices that are going in a trading range.
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And we're looking for a range expansion where the range gets bigger or range contraction.
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So what's happening here when those things happen?
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So range expansion, because, you know, if we start here and all of a sudden it starts getting larger
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or wider, that expanding the range expansion for our low price to our high price, you know, the highs
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and lows are getting further apart.
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And that's an indicator that volatility is rising.
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It's not trading in a narrow price range.
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It's now got a wide price range from low to high.
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So that volatility and that more movement up and down between can be rising volatility rising again,
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providing us higher reward with potential, more risk, with a lot more trading options in between those
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highs and lows over a period of time.
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By the opposite of that, a range contraction would be highs and lows are getting closer together.
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Right.
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So volatility is reducing.
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There's less trading options or choices within the narrow range of prices.
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So, again, that's where we can use this year to see a measure like what is happening here.
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How volatile is the market by looking at an average range indicator that you can you can choose as an
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overlay on your trading platform, we automatically calculate it for you.
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So if we look at an example here, here's an example with Tesla and you can see we have a line moving
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right, left to right.
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That's time, you know, old time to newest time.
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And you'll see it's got a measure here.
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And this is looking over 14 days.
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That's a standard as far as 14 days.
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You can change that, though.
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But let's say you're looking at a standard 14 days and they'll give it a number like this is thirty
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six point eight three for a Tesla at this period of time.
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It was thirty six point three.
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To give you a comparison.
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And this is a very volatile stock, right?
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We know Tesla is a very highly traded, highly volatile stock wide range of highs and lows.
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If we compare that to, let's say, Xcel Energy, which is a utility company, you know, pretty narrow
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range of trading.
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That's eight hours or more, actually more common.
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And it is lower at one point zero.
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So if you're wondering if you're looking at a particular security and you're saying, is this a real
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volatile security, while the chart will show you a little because you see these peaks and valleys.
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But you can also look at the numbers, the raw numbers and say, oh, gosh, regular old utilities like
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we're on one point for this is at a thirty six point eight.
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Now, you could compare that to, let's say, other stocks, like a technology stock like Apple or whomever
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or Facebook or whoever we want to look at.
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And some are more volatile than others.
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Some are more, Walter, than Tesla, for example.
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So we look at the top part here.
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That's our average true range indicator.
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And basically you can see the peaks and valleys as you go up and down and how that kind of matches up
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towards the prices on the bottom.
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You can see we've got our candlesticks and we've got volume wandering along the bottom as far as our
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trading volume.
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So what is this telling us now?
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Let's let's let's look at this a little closer and what is this actually telling us?
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So you can see over in the let's start on the far left, you can see that there's lower volatility,
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at least relatively low volatility in comparison to stock.
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And you can see what's happening with the prices down below.
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They're not going up or down very much.
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Right.
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There's not much, you know, trading volumes, OK, but not super high.
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But it's but it's there's not a lot going on.
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There is a little steady, maybe a little bit downward.
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Right.
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But then there's our line to change our average to range.
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It starts to change and start going up on the upswing.
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You can see that with the blue there, blue boxer in the bottom, the range expansion.
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We're also seeing a definite price trend coming to here as well.
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Again, we're looking for when things might turn or how strong a trend is.
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So once it starts picking up, our experts telling us there might be a turn happening.
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You can see the range is expanding up on the top there.
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But also our trend is now going up in the upper right.
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The trend is now headed upward, too, as well.
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And our volume picked up, too, which is another really confirming indicator that something is going
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on here.
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And as we hit the top of that, that's where our risk and reward kind of comes from.
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You know, you can you can kind of see it's still kind of moving up.
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The eight still very volatile and then the 8R keeps going up because the the stock price actually went
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down, as you can see on this one.
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And in our ATRA, still showing a rising thing because there's still a lot of volatility both up and
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down.
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Right.
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So you have to kind of be aware of that a little bit, too, as far as, you know, maybe not using
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this as a prime indicator, looking at your other indicators, too, on the strength of those trends.
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And then it kind of peaks out there at the top, looks almost like a volcano.
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And we have this reinsurance contracting.
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You know, it's narrowing.
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It's getting less volatile over a period of time here.
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See how it's it?
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It's a little bit lagging indicator.
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It doesn't do it immediately.
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You can.
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See, but over time, how that that line starts to come down in the top to match up with that kind of
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narrow range in there, the yellow or orange type box where it's less volatility, and then again,
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it picks up with the range expanding again and you start seeing more volatility going up there.
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Do you see a spike in volume there, kind of corresponding to a little bit of a spike in our 8R at the
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top?
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And it's all part of an expanding range there, too.
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So you can kind of see how, you know, volatility can give you some insight into this.
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As far as what might be happening.
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Again, I prefer I would recommend that you're using this as more of a confirming indicator versus a
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primary indicator that you use.
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And you might use it with something else to show.
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Like let's say I'm in the middle of that contracting, that narrow trading range there.
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And I want to confirm that I'm kind of in this narrow trading range that I'm there's less volatility.
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I can look at that ETR and see where it's coming off a peak and I can see things are getting less volatile.
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Might not have reached a turning point yet and certainly not at a peak or anything of that nature.
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But I think there's better ones that we're going to talk about here.
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And one is the Bohlinger and I think is actually more visually instructive and appealing, helpful and
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but atras, very popular.
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So it's good to know about ETR and that average try range, and that can be very helpful as well.
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So I don't want to knock it.
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I just want to say I like this other one a little bit better to look at volatility.
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So let's talk about that.
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