Hello all ,
Wondering if anyone has any idea what if any advantages Std Dev has over ATR for measuring volatility and risk? (Including using for stop-loss/position sizing). I personally can't think of any . Currently writing a piece on risk and it popped into my head. I think ATR is better for trading and Std Dev is more suited to longer term investment calculations/models.
If anyone has any different thoughts or advantages to Std Dev perhaps I haven't thought about I would love to hear/debate
ATR vs Std Dev debate. What's better
-
ScottishSpeculator
- Posts: 47
- Joined: 03 Jan 2023
- Been thanked: 3 times
-
waveslider
- Posts: 223
- Joined: 16 Oct 2011
- Has thanked: 66 times
- Been thanked: 20 times
Re: ATR vs Std Dev debate. What's better
I find SDEV much more responsive for short term trading/position sizing.
Consider the S&P during the month of June. A 21 day SDEV rose, while ATR sunk or flatlined.
I see the reason for this as being that there were actually some good up and down movements (close to close) that occurred during the month, but the daily ranges contracted. You could say that there was more of a "body" to the daily bar - open was near low and close was near high and vice versa.
If I use ATR it is for a very short time period, an amount that matches the price cycle.
Consider the S&P during the month of June. A 21 day SDEV rose, while ATR sunk or flatlined.
I see the reason for this as being that there were actually some good up and down movements (close to close) that occurred during the month, but the daily ranges contracted. You could say that there was more of a "body" to the daily bar - open was near low and close was near high and vice versa.
If I use ATR it is for a very short time period, an amount that matches the price cycle.