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Categorizing Market Regimes with ATR

Feb 15, 2021

The trading team in the "Lab" have been doing a lot of work on different ways to categorize market regimes, and the many different characteristics of each regime. 

Of course if you've been seeing my emails and following our work at Pollinate you know that we put a lot of importance in the value of categorizing market regimes and using the SQN indicator to help us do that. 

Another even easier method to categorize the regime is to use the ATR indicator. 

ATR = Average True Range basically smooths out a moving average of the length, which out of the box is 14 bars. 

So the way we use it is if the ATR is declining then the volatility is declining.

If the ATR is rising, then the volatility is increasing. 

Pretty simple!

Let me show you what I mean on the Nasdaq Futures daily chart


This is one we've been talking about for a couple of months. 

You'll notice that the SQN indicator signals a sideway/neutral regime all while the price has been rising...

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