ATR is defined without considering the direction of the move. But when the price is going up or going down, just knowing the range loses some of the big pictures. Is there a modified definition of ATR, so that it returns two numbers, one characterizing the upside range, the other characterizing the downside range?
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1$\begingroup$ That is not the intent of the indicator. It is a volatility indicator. Why wouldn't you just combine it with you favorite price movement indicator, and then you would have your two numbers? $\endgroup$– Ralph WintersMay 10, 2022 at 14:54
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$\begingroup$ The point is the volatility of the tendency of moving up is different of the volatility of the tendency of moving down. Just using one number to characterizer both tendencies can be very off when the two tendencies are drastically different. Combine the original ATR with a movement indicator still does not character the two tendencies in the best way as the two tendencies may be very different, but ATR is just one number, plus another moment indicator just tells the direction, but not telling the magnitute of the directional volatility. $\endgroup$– user11980328May 10, 2022 at 15:07
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$\begingroup$ I get what you're saying. You might have to calculate your own. But, If I was doing this I would be looking at calculating upside standard deviation and downside deviation instead. $\endgroup$– Ralph WintersMay 10, 2022 at 15:45
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$\begingroup$ "The point is the volatility of the tendency of moving up is different of the volatility of the tendency of moving down" - this depends on the asset and the regime (e.g. you can have a "spot up, vol up" regime in equities even if that is not the long-term norm). You might want to test whether upside vs. downside vol is statistically different for the asset you're interested in to decide whether or not to use your modified ATR. $\endgroup$– user42108May 11, 2022 at 14:03
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