Volatility Ratio


DEFINITION of 'Volatility Ratio'

A technical indicator used to identify price ranges and breakouts. The volatility ratio uses a true price range to determine a stock's true trading range and is able to identify situations where the price has moved out of this true range.

BREAKING DOWN 'Volatility Ratio'

The volatility ratio is typically signified with a primary line on a chart, apart from price bars. Although there is no hard-and-fast number used to determine when a breakout is probable, a volatility of 0.5 is most often used by technical traders.

  1. Accounting Ratio

    A way of expressing the relationship between one accounting result ...
  2. Entropy

    A mathematical measurement of the degree of uncertainty of a ...
  3. Wide-Ranging Days

    A description of the price range of a stock on a particularly ...
  4. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  5. Breakout

    A price movement through an identified level of support or resistance, ...
  6. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
Related Articles
  1. Active Trading Fundamentals

    Simple Moving Averages Make Trends Stand Out

    The moving average is easy to calculate and, once plotted on a chart, is a powerful visual trend-spotting tool.
  2. Active Trading Fundamentals

    Support And Resistance Basics

    Understanding the concept of Support and Resistance in trading can drastically improve your short-term investing strategy.
  3. Trading Strategies

    Momentum Indicates Stock Price Strength

    Momentum can be used with other tools to be an effective buy/sell indicator.
  4. Trading Strategies

    Find Turning Points With Single-Day Patterns

    On their own, single-day patterns can be unreliable, but that doesn't mean they can't be used effectively.
  5. Active Trading

    An Introduction To Oscillators

    Find out how this indicator may help improve the average investor's entry and exit points.
  6. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  7. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  8. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  9. Technical Indicators

    Why MACD Divergence Is an Unreliable Signal

    MACD divergence is a popular method for predicting reversals, but unfortunately it isn't very accurate. Learn the weaknesses of indicator divergence.
  10. Chart Advisor

    Weakness In Biotech Will Likely Continue

    You can breathe easy with your biotech holdings--assuming you aren't counting on them to make you rich.
  1. Why is the Volatility Ratio important for traders and analysts?

    The volatility ratio was designed to tell traders when the price of a security breaks out of its true range. When the ratio ... Read Full Answer >>
  2. How do I use Volatility Ratio for creating a forex trading strategy?

    The volatility ratio can be used when analyzing currency pairs in much the same way as stocks. A forex trader can use it ... Read Full Answer >>
  3. What is a common strategy traders implement when using the Volatility Ratio?

    The volatility ratio is a tool that a trader can use to identify whether the price of a stock has been trading out of its ... Read Full Answer >>
  4. What is the Volatility Ratio formula and how is it calculated?

    The volatility ratio indicator is designed as a measure of price range. It is used by traders and analysts to mark existing ... Read Full Answer >>
  5. What are the best technical indicators to complement the Volatility Ratio?

    Volume indicators are the best technical indicators to complement the volatility ratio. The volatility ratio identifies a ... Read Full Answer >>
  6. Why is the Wide-Ranging Days important for traders and analysts?

    Wide-ranging days suggest volatility in an asset or exchange. When a price exhibits a larger-than-normal price range, traders ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!