Detecting Price Deviations from a Moving Average in ATR Units
Summary
This indicator compares a price’s percentage distance from a configurable moving average with the Average True Range expressed as a percentage of price. It first measures the percentage gain or loss relative to the average, then divides that distance by the percentage ATR. When the resulting multiple crosses a user selected threshold, the indicator marks the chart. The described defaults are a 50 period moving average and a threshold of ten ATR multiples; users can choose the moving average type, its length, and the threshold.
The intended interpretation is that unusually large distance from the average may flag a high volatility episode or a possible reversal area. The document describes chart markers and displayed metric values, but supplies no historical tests, examples of signals, or measured outcomes. It also does not specify a trade entry, exit, or risk sizing rule. A large deviation alone does not establish that a reversal will occur, and thresholds may behave differently across instruments and market conditions.
Key ideas
- The indicator measures the percentage distance between price and a moving average.
- It expresses ATR as a percentage of price and divides the moving average distance by that value.
- A chart marker appears when the calculated ATR multiple exceeds a configurable threshold.
- Users can adjust the moving average type, its lookback length, and the required multiple.
- The indicator identifies unusual deviations but provides no tested evidence that they predict reversals.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.