June 9, 2011
- in Uncategorized by schooloftrade
Can Average True Range be Too High?
What does Lower Average True Range mean?
– There is less trading range on average for the specific timeframe you are looking at.
– HIGHER ATR = wider range
– LOWER ATR = narrow ranges
– Lower ATR will results in more false signals
– Sometimes the ATR can be too high?
Can the ATR be too high? Absolutely.
Today was a great example of how crude oil had very high ATR, the speed was very high, and the market was almost impossible to trade without using greater than 20 tick stop.
The key is, we don’t want falling ATR, we want rising, but we don’t want it too high either.
Its like volume and the ES. The ES has too much volume, making it hard to see big moves. On the other side of that coin the Natural Gas Market has too little volume, making it also very hard to trade.
We need something right in the middle….like Crude Oil, Gold, Euro, Russell. Not to much, not too little, just right.
