Sunday, December 14, 2008

Nifty - Volatility & ATR

The Average True Range (ATR) is a great measure of volatility, much more useful than Beta from a traders persepective. The current 14 period ATR for the Nifty is 180 points (in percentage terms 6.1%). This is down from 230 points (7.8%) around the end of October. In end August it was 109 points (2.4%). So it appears the volatility is reducing albeit it is still very high. This can be good for momentum traders as too much volatility results in stops getting hit frequently.

The short term trend for the Nifty is up currently. The market seems to have discounted the bad news and the auto industry news didn't seem to have impacted Nifty at all. The coming week is going to be very interesting - let the market decide if this short term uptrend is upheld.

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