Elder’s Market Thermometer for Intraday Volatility
Summary
The Market Thermometer is an indicator described in Alexander Elder’s trading book. It estimates intraday volatility by measuring how far the current high or low extends beyond the previous bar’s range. It compares this measure with an exponential moving average to identify unusually active and unusually quiet conditions.
The indicator colors bars according to their relation to the average: moderate and large volatility spikes receive different warm colors, while below-average readings are marked through a quiet spell, with a separate color after that spell persists. The document gives implementation logic and example parameter settings, but no market, timeframe, or performance evaluation. It says the readings generate signals as described in the book without specifying those trading rules, so this material alone does not establish entries, exits, or profitability.
Key ideas
- The indicator measures extensions in the current bar’s range relative to the previous bar.
- It compares the volatility reading with an exponential moving average.
- Color changes distinguish volatility spikes from below-average conditions and sustained quiet periods.
- The document does not provide the full trading rules or evidence of performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.