what is the volatility ratio 
the volatility ratio is a technical measure used to identify price patterns and breakouts in technical analysis it uses true range to gain an understanding of how a security s price is moving on the current day in comparison to its past volatility there are several different versions of volatility ratios the most common being adaptations of average true range atr understanding volatility ratiosthe volatility ratio is a measure that helps investors follow the volatility of a stock s price it is one of a few technical indicators focused on volatility in general the standard deviation is typically one of the most common measures used for following volatility standard deviation forms the basis for several technical channels including bollinger bands comprehensive envelope channels of many different varieties are used by technical analysts to identify price ranges and volatility patterns that help lead to trading signals historical volatility is also another common trendline that can be used to follow volatility the volatility ratio was developed to contribute to the analysis of price volatility across the industry volatility and volatility ratio calculations may vary for technical analysis jack schwager is known for introducing the concept of a volatility ratio in his book technical analysis 1calculating the volatility ratioschwager s methodology for calculating the volatility ratio builds on the concept of true range which was developed and introduced by welles wilder but has several iterations schwager calculates the volatility ratio from the following 1other iterations of the volatility ratio may include the following volatility ratio signalsinvestors and traders will have their own mechanisms for following and detecting patterns from the volatility ratio this ratio is typically plotted as a single line on a technical chart either as an overlay or in its own display window a higher volatility ratio will signal substantial price volatility in the current trading day in general volatility can be a signal of disturbances or developments affecting the security s price therefore high volatility may lead to a new trend for the security s price in either a positive or negative direction traders follow volatility and the volatility ratio in conjunction with other trading patterns to help confirm a trading signal for investment investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 