What it does
ATR on its own is an absolute number, so it is hard to tell whether 15 pips of ATR is a lot or a little for a given market. This indicator answers that by ranking the current ATR against its own recent history. The result is a 0 to 100 percentile shown as a histogram: blue for a low volatility regime, grey for normal and orange-red for high.
How it works
- True range = the largest of: high - low, |high - previous close|, |low - previous close|.
- ATR = previous ATR + (true range - previous ATR) / ATR period (Wilder smoothing).
- Percentile rank = 100 x (number of the previous L ATR values that are lower than the current ATR) / L, where L is the lookback.
- Regime: low when the rank is below the low level, high when above the high level, normal otherwise.
- An alert is sent once per bar when the last closed bar's regime differs from the bar before it.
For example (illustrative), with a lookback of 100, a rank of 85 means the current ATR is higher than 85 of the previous 100 ATR readings.
How to use it
Volatility regime is a filter that can make other tools more selective:
- Low regime: ranges are compressed. Breakout traders often watch these periods because expansion tends to follow, while mean-reversion approaches can work inside the range.
- High regime: bars are large and fast. Stops need more room, so position size usually has to come down to keep the same risk. The Position Size Calculator helps with that.
- Normal regime: standard conditions for most strategies.
Because the rank is relative, it works the same way on forex pairs, gold, indices or crypto, and on any timeframe. Read the volatility lesson and the glossary entry on volatility for background.
Settings
| Input | Default | What it changes |
|---|---|---|
| ATR period | 14 | Smoothness of the ATR being ranked |
| Percentile lookback | 100 | Longer lookbacks compare against a longer history |
| Low regime level | 20 | Threshold for blue bars |
| High regime level | 80 | Threshold for orange-red bars |
| Popup alert / Push notification | false | Alerts once per bar on a regime change |
Limitations
- A percentile only says how volatility compares with the recent past; it does not predict direction or the size of the next move.
- After a long quiet period even modest volatility can rank as high.
- ATR lags, so regime changes appear after the volatility shift has begun.
- The first ATR period x 2 + lookback bars have no reading while the calculation warms up.