Jim Dean Sage   Posts: 3022 Joined: 9/21/2006 Location: L'ville, GA  User Profile | Thanks for the backup Tom and the correction in nomenclature. This concept is one that I've documented from my own work done several years before N came up with that ratio. So I can speak to it a bit - in fact I recall having posted a long explanation of it many years ago in the N forums (probably lost forever in archives). Nutshell: Range to Volatility is just another way of saying Reward to Risk (as potentials). It can be determined by using historical price-swings as a measure of potential future Reward, and using historical ATR as a measure of potential Risk. Divide the price-swing by the number of bars it occurs over to get average profit per bar. ATR gives average risk-wiggle per bar. So, dividing the first by the second yields profit/risk ratio. There are many ways I've used in the past for calculating the Profit swing. The most useful today would be to base it on the WaveTrader functions to indicate high low pivots. I've documented elsewhere how to find the bar-numbers associated with those pivots. Taken together, they provide a good potential measure of "ideal" reward. I hope this helPs explain the concept better, and gives you some ideas about how to come up with your own solutions. Or, as Tom suggests - join the Nirvana Club !! | |
