Can some1 please explain the significance of ATR during stock scanning. Please do share the process to scan the stocks that satisfies the given setup conditions

General
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ATR is a measure of volatility. Depending on the type of stock you want to scan, you can put a ATR filter. Higher ATR means higher volatility and vice versa. Typically 14 bar ATR is used.

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Concrete description about ATR can be found in the link http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:average_true_range_a

ATR calculation method given should help u out to create AFL file.

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Thanks Akshay. Can you share some AFL(if you have any) for stock scanning.?Im new to amibroker and im slowly learing it. So it i need some reference to create my stock scanner… Thanks again. :slight_smile:

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Important point is volatility is cyclical ie it expands and contracts. So if you see extreme volatility, you can be assured that it will come down to reasonable level. This is the basis for narrow range trading. Meaning if the range is contracted for a long time (7 days), it is sure that it will expand any time. That breakout is captured.
Another measure for volatility is bollinger band.

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That is quiet clear now Piyush. Thanks for the reply… But one small doubt. Are you saying that the volatality shifts from narrow range to wide range and vice versa in a noticeable period of time???

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Thanks alot sdg…:slight_smile:

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Volatility is cyclical, high volatility is followed by low volatility. This pattern is consistent.
However there is no set time period. Meaning no one knows how long the volatility will be low and when it explodes.