Volatility Ratio

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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.

INVESTOPEDIA EXPLAINS '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. 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 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 >>
  5. 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 >>
  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 >>
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