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 â€“ 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.