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SM ATR is a smoothened Average True Range indicator. SM ATR uses the T3 adaptive smoothing in its calculation instead of the normal moving average smoothing in ATR calculation. SM ATR measures the volatility. SM ATR is not a directional indicator, such as MACD or RSI. Instead, SM ATR is a unique volatility indicator that reflects the degree of interest or disinterest in a move. Strong moves, in either direction, are often accompanied by large ranges, or large True Ranges. This is especially true at the beginning of a move. Uninspiring moves can be accompanied by relatively narrow ranges. As such, ATR can be used to validate the enthusiasm behind a move or breakout.
SM ATR can be used to confirm price breakouts and trend reversals. A bearish support break with an increase in SM ATR would show strong selling pressure and reinforce the support break. A bullish reversal with an increase in SM ATR would show strong buying pressure and reinforce the reversal. SM ATR can be useful in determining stop loss levels also. When the ATR is higher, large stop loss must be used to stay in the trade.
Parameters used in the SM ATR indicator are ATR period, t3 smoothing period and smoothing factor b. Default ATR period is 14. Parameter values are modified in the VTL editor.
sm_ATR_indicator.zip (2.87 KB)