Kaufman Efficiency & Volatility

Discussion in 'Trading' started by Darklingg, Dec 29, 2010.

  1. How do the kaufman efficiency ratio and volatility fit together?

    Kaufman ER = [cl(today) - cl(n days ago)] / [mean(ATR(n days))]

    For instance how can I compute tomorrow's most likely absolute range (i.e abs[cl(tomorrow) - cl(today)]) knowing kaufman ER up to now?

    I assume that I know ER's distribution and that it has mean M and std S

    Thanks
     
  2. Instead of the "net change", i.e. the difference between today's settlement and yesterday's settlement, why not the day's total range instead, the "sigma"? :confused:
     
  3. What do you mean by "day's total range"?
    How would it work with it instead of the absolute net change?
     
  4. dave4532

    dave4532

    Tomorrow never comes...
     
  5. 1) The daily range, the high minus the low.
    2) Intra-day volatility can shake you out of a position before the day's close. :cool:
     
  6. Alright.

    So how can I estimate tomorrow's most likely total range based on Kaufman ER up to today?
     
  7. 1) Price multiplied by implied volatility divided by either the square root of 256 or 365.25 equals sigma. :cool:
    2) The Kaufman "thing" does not figure into it. :(