Corey over at Afraid to Trade posted a piece in which he discusses the use of ATR percentage. I’ve already submitted a comment on that post complaining about how he’s stealing my ideas. 
Well, sort of stealing. He got the idea from someone else. I, however, wrote about what I called Normalized ATR (N-ATR) in an article for Trade2Win like three years ago and mentioned it in a post on this blog. I also had an article in Stocks & Commodities (Normalized Average True Range – A Basis for Comparison) back in May 2006.
Basically, the idea behind N-ATR (or Corey’s ATR Percentage) is to make ATR directly comparable between trading instruments of different price levels – or when you’re looking at something over a long time period where prices have changed a lot.
By the way, I use N-ATR in my Equity Market Analyst job to help identify stocks that are good trader candidates.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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