It’s all Relative (Ranges)

In this month’s Indicator Spotlight, we’re looking at the Relative Ranges indicator and how you may use it to address changes in volatility between the overnight, European and US regular sessions. Watch the video or continue reading below to learn more:

If a standard volatility indicator such as the Average True Range is used to analyze average ranges, you will see a steady increase during the European and US trading sessions, and a fall-off during the overnight. The reason is that the European and US sessions are compared to the overnight session, which is comparatively sees very little movement.

This issue can be solved with the Relative Ranges indicator, because it allows you to compare the average ranges at a specific time of day, with the average volatility of the past N days. Therefore, it compares the overnight ranges with the overnight session, the volatility of the European session with the European session, and the regular session with the regular session.

Also, this indicator allows you to compare the average volatility at a specific time and day of the week. This is useful for days and times where news reports are issued (the weekly petroleum and natural gas reports for example). Today’s range is then compared with the average volatility calculated for the same day of the week over the N preceding weeks.

Accordingly, the Relative Ranges indicator will put you in a better position to identify increasing / decreasing volatility and help you locate breakout and reversal patterns together with the Relative Volume indicator.

To download the Relative Ranges indicator, visit our indicator library now:

 

 

FInally, if you missed our launch of the Zerolag Oscillator for NinjaTrader 8, swing by our premium section to learn more about it. We've also released a video featuring the most important functions here: