In today's markets based on an overall concept and the contribution of technology where the impact of variables as one goes from the distant planet, understanding the true meaning of the volatility is becoming more important.
Volatility: The majority of market players, defined as the volatility of the price action in a directional sense, for it would be easy to tell if a market is volatile should be observed only if the graph has risen or fallen.
However, directionality is confused with the true sense of the volatility. According to Waller Wilder only directly proportional to the volatility is the amplitude of oscillation, and this is defined as the distance traveled by the unit price in a uniform time.
Let's look more closely at this concept, suppose at a price close to the same opening price. Fig 1, so we will not conclude that the amplitude of the meeting was zero. So the real amplitude is the distance between the maximum and minimum of sitting here and we understand the concept of meeting the standard unit of time studied. Can you image having this day, month, or 5 minutes, where each bar or candle holds a standard unit of time in which the price was developed.
Fig 1.
The amplitude of oscillation authenticates (AOA) is the maximum distance traveled by the price and this should be taken from the close of the previous meeting to the maximum or minimum of the meeting sub. Consideration. Fig 2.
Fig 2
Therefore the amplitude of oscillation Authentic is defined as the distance between the following:
1. The distance between the maximum and minimum of the meeting
2. The distance between the previous closing and the maximum of the meeting
3. The distance between the previous closing and the minimum of the meeting
For the amplitude of vibration is a significant fact, should be considered more of a session and apply them in half-market, to design signs for the future.
Here is an example:
The equation for the half AOA or shortened in its English acronym ATR (Average True Range).
If we find eg the true extent of the last 8 meetings should perform the following calculation:
1. Get the average maximum amplitude of the last 7 meetings = 138.28
2. Obtain the amplitude of the last session = 100
3. Apply the following formula
Current AOA = 7 X 138.28 (Avg. AOA) + 100 (last session AOA / 8
In terms of graphical effects the expression of ATR will look like a line in an oscillating indicator that anticipates open overbought and oversold zones, indicating minimum buy in and sell for comparatively high maximum values of the indicator. The principle of forecasting based on this indicator can be drafted as follows: the higher the value of the indicator, the higher the probability of a change of the trend of the indicator value is the lower, weaker trend.
Here is an example:
Fig 4
