Volatility Indicators

Four indicators measure the size of movement rather than its direction. They are most useful for setting sensible distances, and for telling a quiet market from a busy one.

Default period 14. It gives the average distance the price travels in one candle, in points.

It has no direction and no upper limit — it is a measure of size only.

Its most common use is as a filter: ATR is above 30 means "only trade when the market is actually moving". Traders also size their stop loss by ATR so that a quiet day and a wild day are not treated the same.

Defaults: period 20, standard deviation 2. Three outputs: upper, middle and lower.

The middle is a 20-period average; the outer bands sit two standard deviations away, so they widen when the market is busy and squeeze when it is quiet.

Two opposite strategies use them. Reversal traders buy at the lower band expecting a bounce. Breakout traders buy a close above the upper band expecting continuation. Both are written the same way — the difference is which side you take.

Default period 20. The upper is the highest high of the last 20 candles, the lower is the lowest low, the middle is halfway.

It is the simplest breakout tool there is: a close above the upper band means a 20-candle high.

This is the classic Turtle-trader rule, and it needs no interpretation — the numbers are exactly what they say.

Defaults: period 20, ATR period 10, multiplier 2. Also gives upper, middle and lower.

It looks like Bollinger but is built on ATR rather than standard deviation, which makes it smoother and less prone to sudden widening.

Some traders watch both together: Bollinger squeezing inside Keltner is a well-known "quiet before the move" setup.