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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (50206)	8/27/2000 6:59:24 AM
From: Atin	Read Replies (2) \| Respond to of 63513

I've seen both you and arno using Average True Range box sizes and I thought I'd tell you how I use it. I use average true range only as a guide because the box sizes it comes up with change from day to day. I use average true range when I'm looking at an entity that I cannot come up with an easy box size for e.g. VIX, Dow Bond Index etc -- things I'm not sure the traditional box sizes are correct for. I use average true range, see what the movements return as a box size and then I adjust the box size to a close "round" number and use a user-defined box size of the rounded number instead. So for CMRC I might have left the box size as 1 since average true range came up with a box size of 1.11. For the VIX, it came up with a box size of 0.35, but I seem to like a user defined box size of 0.5 and have been keeping that but I think I came up with the box size based on the average true range some time ago. Basically, I use average true range as a way to figure out what a good box size might be based on the recent movement, but I then "optimize" based on experience. Otherwise the box sizes change from day to day (or more usually, week to week) and are a pain because the chart may not look similar from day to day. Percentage based (or log) charts are best though, at least, they're most "scientific". They're not quite intuitive, because the box sizes are sort of weird as they increase by a constant percent rather than a constant box size. But the idea is to increase the box size based on the prices rather than some arbitrary cutoff point like 5, 20, 100 etc. It is similar to why you may want to look at log bar/candlestick charts vs an arithmetically scaled chart. I tend to use both traditional and percent box sizes though, sometimes it is just nice to see round numbers! After all, the market is made up of humans, and humans like round numbers. I wonder what would have happened if we'd had 16 fingers and thumbs . . . would 128 have been the invisible resistance/support that 100 always seems to be? <g> -Atin