Volatility Ratio
Candlefocus EditorThe most common version of the Volatility Ratio is the ratio of an asset’s day true range to its average true range. True range is the difference between the highest and lowest prices on any given day. This measure makes it easier to compare different assets and identify possible opportunities in the markets. This ratio is used to determine the volatility of an asset, or how much its price has moved up or down in a specified period of time.
There are other variations of the Volatility Ratio, such as the ratio of an asset’s day high to its day low. This measure is used to gauge the degree of volatility in a particular stock. A high ratio indicates an increase in the asset’s volatility, while a low ratio indicates a decrease in volatility.
The Volatility Ratio is also used to assess the potential risk of investing in an asset. By comparing the asset’s true range and its average true range, investors can determine whether the asset is more or less risky than a similar asset. This is an important consideration when making an investment decision.
Overall, the Volatility Ratio is an indispensible tool in the stock market. By evaluating the relative changes in price movements, traders can identify potential trading opportunities and assess the potential risk of their investments.