Beginner Question about ATR

[DENGLI]

Hi,

I am right at the start of understanding risk management and I'm currently reading "Global Macro Trading" by Glen Gliner. In the first chapter he talks about ATR used by the turtle traders. Gliner writes in the context of having calculated ATR (which he calls N) and the position size: "N is the volatility of a one standard deviation move". Where is this coming from? Is this an assumption he is making?

I don't understand how he makes the move from N(t) = (N(t-1) * 19 + TR) / 20, assuming t is now and we are caculating the 20 day average price move / 20 day average volatility.

Any help is greatly appreciated!

 

[nine]

He's making a statement that is not mathematically correct.

However it might be a reasonable approximation for his purposes although I'd expect standard deviation to balloon more for extreme moves. Compare Bollinger bands to Keltner channels to see this.

 

[Opak]

Hi,

I am right at the start of understanding risk management and I'm currently reading "Global Macro Trading" by Glen Gliner. In the first chapter he talks about ATR used by the turtle traders. Gliner writes in the context of having calculated ATR (which he calls N) and the position size: "N is the volatility of a one standard deviation move". Where is this coming from? Is this an assumption he is making?

I don't understand how he makes the move from N(t) = (N(t-1) * 19 + TR) / 20, assuming t is now and we are caculating the 20 day average price move / 20 day average volatility.

Any help is greatly appreciated!

Have you been able to find additional information on the relationship between ATR and standard deviation since your initial query? How do you understand this concept now?