I often use the ATR as a volatility filter, to get better entries or to just get a quick understand of the volatility when screening different stocks.

With this indicator you can use the ATR in a few different ways:

-- Dynamic ATR --

To get more comparability between stocks I use a dynamic/normalized ATR, so I've experimented with two different methods.
ATR% can be calculated using John Forman’s approach called Normalized ATR (ATR / Close * 100). Or it can be calculated using what I call "Non Forman",
where the normalization happens to the true range and not to the average true range (average of ( TR / Close * 100)). I think this method is "cleaner",
though the difference between the two is minimal. For more on this see https://www.macroption.com/normalized-at...

You can chose between normal ATR (not normalized), Forman's normazation method, and "Non-Forman" normalization.

-- Smoothed ATR --

I originally used an ATR on a higher timeframe to get an idea of the overall volatility . But with higher time frames you always end up lag (or repainting
issues when combining into an indicator). So I expertimented on smoothing the true range, by including several bars into the calculation. I most trade
on a daily time frame so to my default "smoothing" is calculating the true range based on the last 5 days. This pretty much equals how the weekly TR
would be calculated, but since it updates daily we get a different result.

You can chose between displaying the standard ATR, the smoothed ATR or both.

-- Thresholds --

To make it more clear and visually more appealing I added thresholds and I'm plotting warning zones for low volatily.

-- Moving Average Method --

I think the best results from ATR comes when using RMA. But since I wanted to experiment with different options, the moving averages can be done using
RMA, SMA , EMA , Hull MA, or WMA .
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

Want to use this script on a chart?


I'm pretty new to pine script, so any suggestions on how to improve the code would be appreciated.
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