Tuesday, January 23, 2007

ATR is Volatility

I feel a lot better in my current configuration - day trader. And we've had a lot of opportunities this morning. I started with the QID/QQQQ trade and lost 11 cents on the QID side. More than made that up on the Q's (so far).

Several good trades presented for short term trading and I have three problems with that - first I like to buy in bulk rather than nibbles; second I don't have unlimited funds; third I only like to day trade no more than two stocks at a time. So given set-ups appearing on BIG, CVS, EIX, KNOT, KKD, MAT and MOLX what to do? How do I select the two to hold?

The answer is the two with the highest volatility. But how do I do that? Simple - I get the 15-minute 10-period Average True Range for each of the stocks and play the two highest ones. Today that was BIG with an ATR of 16 cents and KNOT with an ATR of 25 cents. BIG returned 40 cents (so far) and KNOT is providing about 65 cents so far.

I have found that the ATR is a good substitute for historical volatility for daytrading purposes. I used to go to Ivolatility.com and look up each stock but no longer - now I just look at the ATR provided by prophet.net as a technical feature of their charting capability. I just looked on Ivolatility and discovered that yes indeed BIG and KNOT have the highest current historical volatility of the list above.

I'm not a scalper so I don't need extraordinary speed - but I do like to make life as easy as possible for myself.

1 comment:


Once again the market surprises.