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.

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RELATED FAQS
  1. What is the Volatility Ratio formula and how is it calculated?

    Understand what the volatility ratio indicator is, how it is calculated and the way this technical indicator is used by traders ... Read Answer >>
  2. Why is the Volatility Ratio important for traders and analysts?

    Read about the rationale behind Jack D. Schwager's volatility ratio, which compares recent trading ranges with historical ... Read Answer >>
  3. What are the best technical indicators to complement the Volatility Ratio?

    Learn why using the volume indicator with the volatility indicator helps investors identify breakouts from established trading ... Read Answer >>
  4. How do I use Volatility Ratio for creating a forex trading strategy?

    Read about how technical analysts might use Jack Schwager's volatility ratio within the context of a larger foreign exchange ... Read Answer >>
  5. Which market indicators reflect volatility in the stock market?

    Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and ... Read Answer >>
  6. What is a common strategy traders implement when using the Volatility Ratio?

    Learn how to create a strategy using the volatility ratio with uptick volume and downtick volume to signal reversal of trend ... Read Answer >>
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