I wanted to take one more look at Average True Range for Top40.
Presented chart (end of the day) starts somewhere in the middle of 2003. We were going through nice bull run, then through massive and fast bear run, with new bull run starting in March 2009.
Top part of the chart represents 5-day Average True Range, expressed in percentage terms. This is done to compare apples to apples, because it is not the same when ATR is at 1% and Top40 is at 10.000 points or ATR is at 1% and Top40 is at 30.000 points.
What we see on this chart is that for the most of the time, over last six to seven years, 5-day ATR (%) spent time in the range between 1% and 2.5% (two horizontal black lines). There were some massive peaks when market sold off and especially during bear market in 2008 and 2009.
Currently 5-day ATR (%) is around bottom of that range and during last few months it was there only in late December and early January, when volumes were low and traders were away from their screens.
Unfortunately, our swing systems are not producing good results with volatility being as low as it is now. However, if there is something to look forward, ATR should go up from here and if that is to happen our system should start to perform better. I am not sure for how long this period is going to last, but be ready to pick up nice points and be emotionally ready for fast swings.
Trade with trend!