Which Volatility Measure? by Gordon Gustafson
ARTICLE SYNOPSIS ...Which Volatility Measure? by Gordon Gustafson
Is it true? Is average true range, an approximation, superior to standard deviation, the most beloved of quants, as a measure of volatility?
Many traders use some measure of volatility to
generate signals in their trading. For instance, one common entry technique is to buy when the price breaks outside a certain range of the volatility of the recent price action, either to the upside for trend following or below for countertrend systems. Another common use for volatility is in the construction of trailing stops. An exit signal might be generated ...