A Very Relative Range

Relative Ranges for NinjaTrader 8

In this month’s Indicator Spotlight, we’re looking at the Relative Ranges indicator for NinjaTrader 8. One may apply the Relative Ranges indicator to address changes in volatility between the overnight, European and US regular sessions. Watch the video or continue reading below to learn more:

Average True Range vs. Relative Range

A standard volatility indicator, such as the Average True Range, will analyze the average range. However, 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. Of course, the overnight is very light on volume when compared to the regular session.

One may address the issue by using our NinjaTrader Relative Ranges indicator. It allows you to compare the average range at a specific time of day, with the average volatility of the past N days. Therefore, you may compare the overnight range with the overnight session. Likewise, the volatility of the European session with the European session, and the U.S. regular session with the U.S. regular session.

Relative Ranges for NinjaTrader 8
Relative Ranges for NinjaTrader 8

Also, the Relative Ranges indicator allows you to compare the average volatility at a specific time and day of the week. The feature can be used on specific times and days when specific news releases are expected to issue. For example, the weekly petroleum and natural gas reports are usually published on specific weekdays. One may then compare today’s range with the average volatility calculated for the same day of the week over the N preceding weeks.

Breakouts or Reversal Setups?

Accordingly, our NinjaTrader Relative Ranges indicator will put you in a better position to identify increasing / decreasing volatility. This in turn will help you determine whether to pursue breakout strategies when the cumulated relative range is above average. Alternatively, you can use it for reversal setups during sideways markets when ranges are below average.

Specific indicators for those purposes are available from our premium suite. The Auction Bars indicator seeks to identify reversal patterns plotting in a higher timeframes. This approach is useful during sideways / consolidating markets. Furthermore, the Zerolag Oscillator seeks to identify early trend retracments and momentum setups, more information on that here.

The Relative Ranges indicator is built on the same concept as the Relative Volume indicator. Both may be used in combination with Trend Filters, Trend Analysis and Momentum Oscillators. Specifically, you may consider the Adaptive Laguerre, ADX, Know Sure Thing or the Heikin Ashi candles for determining market trends. You may also review Support / Resistance indicators from the Session Tools and Fibonacci categories.

To establish the relative ranges, visit the volatility indicators category of our library of NinjaTrader Indicators. More information on the Relative Ranges indicator available via the link below:

The indicator is available for NinjaTrader 8.