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Looking for a more detailed volatility measure than daily ATR
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Looking for a more detailed volatility measure than daily ATR

  #1 (permalink)
Elite Member
Denver Colorado/USA
 
Trading Experience: Intermediate
Platform: Sierra Chart, ThinkorSwim
Favorite Futures: ES,ZN,6E,CL,GC
 
LittleFinger's Avatar
 
Posts: 51 since May 2017
Thanks: 37 given, 35 received

Looking for a more detailed volatility measure than daily ATR

Hello,

I trade many different futures contracts and like to compare volatility between them for risk management and for strategy development. I have been using daily Average Percentage True Range (APTR) as a volatility measure, but I think I can do better.

Daily ATR can be used to measure volatility, but that is not the whole picture. 2 contracts could have the same daily APTR, but one could be doing twice the intra-day zigzagging as the other one. How do we get total movement?

I was thinking that you could use a 1 period APTR reading applied to a 1m chart and then total the results for the day? Obviously any zigzags that occurred during the minute period would not be counted, so I guess you could go down to the tick if you wanted.

This could be done in excel if you have the OHLC data, but an indicator would be better of course. I am currently using Think or Swim, but also play around in Sierra chart for analysis purposes. I have no idea if there are any existing indicators for this in either platform.

Ideas?

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  #2 (permalink)
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  #3 (permalink)
Elite Member
Denver Colorado/USA
 
Trading Experience: Intermediate
Platform: Sierra Chart, ThinkorSwim
Favorite Futures: ES,ZN,6E,CL,GC
 
LittleFinger's Avatar
 
Posts: 51 since May 2017
Thanks: 37 given, 35 received

I came up with a slow but accurate method I think


I am not experienced with creating indicators but I am an excel junkie so I came up with a volatility calculator that I think achieves my purpose for now.

So, as I was describing in the last post, I wanted to get a calculation for intraday volatility. With an ATR approach you must define some time period as your unit of concern so I decided that 5m bars would work.

What I believe I am calculating here is the average percentage movement of 5m bars for the past week. I have this expressed in pure percentage and in dollar terms based on the current margin requirement of the contract (TDAmeritrade, not best for futures i know).

The method:

Based on ES trading hours I determined that there are about 114 trading hours in a week from when it opens on Sunday to the Friday close. There are 12 5 minute periods in an hour, so that makes for 1368 5 minute periods in a trading week.

I created a 5m bar chart that only shows the last week of trading and I added a 1368 period ATR study to it.

I just populate my spreadsheet with the final ATR reading for the week and the closing price of the week.

Here is what I have so far:

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For now I think I'm going to update this weekly for a few of the contracts I am interested in so that I can begin plotting the volatility trend.

Unfortunately I don't know how to go about this for bonds yet due to the fractional units.

Maybe someday I'll figure out how to turn this into an indicator

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  #4 (permalink)
Trading Apprentice
Pecs, Hungary
 
Trading Experience: Beginner
Platform: Tradestation
Favorite Futures: ES, CL, GC
 
Posts: 14 since Jun 2018
Thanks: 7 given, 9 received

Hi LittleFinger,

Thanks for showing your Excel sheet, looks interesting.

Maybe this formula might help?

https://arstechnica.com/civis/viewtopic.php?t=1117894

=LEFT(A1,FIND("-",A1)-1)+SUBSTITUTE(RIGHT(A1,LEN(A1)-FIND("-",A1)),"+","")/32+IF(RIGHT(RIGHT(A1,LEN(A1)-FIND("-",A1)),1)="+",1/64,0)

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  #5 (permalink)
Elite Member
Denver Colorado/USA
 
Trading Experience: Intermediate
Platform: Sierra Chart, ThinkorSwim
Favorite Futures: ES,ZN,6E,CL,GC
 
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Posts: 51 since May 2017
Thanks: 37 given, 35 received

I'll take a look. Thanks for the suggestion!

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