Relative Ranges

The Relative Ranges vs. Relative Volume

The Relative Ranges indicator uses the same architecture as the Relative Volume indicator, but the logic is applied to ranges. It measures the range of a fixed period bar against the average range over the same period during the preceding n days and can be used to assess average volatility.

Indicator Description

The Relative Ranges indicator can be used to address changes in volatility between the overnight, European and US regular sessions.

If standard volatility indicator (ATR) is used to analyze average ranges, a steady increase will be seen during the European and US trading sessions. This is because the data included in the lookback period for the European and US sessions are compared to the overnight session. This session has comparatively little movement. Conversely, comparing the European and US sessions with the overnight will always show a fall-off in volatility.

The Relative Ranges indicator solves this issue comparing the average ranges at a specific time of day, with the average volatility of the past N days. Specifically, 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.

The Relative Ranges indicator furthermore allows you to compare the average volatility at a specific time and day of the week. Days and times that have regular news releases, for example weekly petroleum and natural gas reports, the range is compared with the average volatility calculated for the same day/time of the week over the N preceding weeks.

Identify increasing / decreasing volatility can help in locate breakout and reversal patterns together with the Relative Volume indicator. This information can be used to run breakout strategies when cumulated relative ranges are above average and countertrend strategies when cumulated relative ranges are low.

The indicator is available for NinjaTrader 8.