Finance textbooks use Standard Deviation (SD) as a measure of volatility, a practice which has been carried forward by industry as well. SD uses Closing Price to measure volatility. Average True Range (ATR) uses more inputs as it also considers High and Low price for the period, besides Close. This makes ATR a conceptually better metric than SD. ATR is an absolute measure of volatility, but it can be easily converted into percentage by dividing the True Range (TR) by previous closing price.
For example, look at the following calculation of Maruti Suzuki, which had a TR of Rs.343.60 on 17-May-2024. This can be easily converted into a percentage by dividing it by the previous closing price of Rs.12,497.65 (i.e. 343.60 / 12,497.65 = 2.75%)
On the other hand, see the same for Motherson Sumi Wiring (an auto ancillary which caters to most of India’s top car manufacturers with Maruti as its largest customer):
On 17-May-2024, it had a TR of Rs.2.65 which is 3.81 % of the previous closing price of Rs.69.50. Conversion of absolute values into percentages this way makes volatility of the two stocks with widely differing absolute values comparable.
One can calculate TR & ATR anytime just by downloading the stock price history from NSE website and copy paste it onto an excel, once the basic formulas are input into the excel.
Technical analysis textbooks take 14-day average to calculate ATR, but this is at our discretion. One can choose what one wants. As a long-term measure, I sometimes look at 1 year average or 1-year median TR (instead of just the 14-day average which is more short-term). However, this is just for added insight into the stock I am looking at, not as a selection criterion for reasons explained earlier.
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