ATR is an excellent indicator to visualize if volatility is increasing or decreasing. But what if you want to compare the volatility to another pair or instrument?
Since each pair with different quote currency has different pip value, the output of the ATR doesn’t really say that much.
Comparing pairs to other instruments is even harder.
What you as a trader care about is how much the pair has moved up or down in percentage, therefore normalizing ATR to percent would make things much easier.
This indicator “True Volatility” is really just the ATR indicator modified to put out average true range in percent instead. It also got some important levels preplotted out for easier comparison.
- Knowing ATR in pips, is good for visualizing increasing volatility, and expected pips your leveraged money would move in a set time span.
- Knowing ATR converted to Percent, is good for comparing volatility and how much your money would’ve moved if you had no leverage.