Volatility Indicators — Sizing Risk and Identifying Regime
Volatility indicators describe how widely price ranges relative to its own recent history. ATR, Bollinger Bands, Keltner Channels, Donchian Channels and Standard Deviation all serve this purpose. They aren't directional — they tell you the magnitude of moves to expect, which is essential for position-sizing, stop placement and identifying whether the market is in expansion or contraction.
How to Read This Category
A well-known regime cue is volatility contraction followed by expansion: when Bollinger Band width or ATR sits at multi-month lows, the market is coiled and meaningful directional moves often follow. Use ATR to scale stops dynamically rather than fixing a percentage — a 1× ATR stop in a quiet regime is the right size; the same stop in a noisy regime will be triggered repeatedly. Avoid using a single volatility tool to imply direction; pair it with a trend or momentum read.
All 5 Indicators in This Category
The Average True Range (ATR) is a technical analysis indicator, introduced by J. Welles Wilder Jr. in his 1978 book, 'New Concepts in Techni
Bollinger Bands, developed by John Bollinger in the 1980s, consist of a middle band (20-period SMA) and two outer bands set at 2 standard de
Donchian Channels are a volatility-based technical indicator developed by Richard Donchian, often hailed as the "Father of Trend Following."
Keltner Channels are a volatility-based technical indicator consisting of three separate lines: a central Exponential Moving Average (EMA) a
Standard Deviation is a statistical measurement that quantifies the dispersion of price data relative to its Simple Moving Average (SMA). In
FAQ
What does it mean when Bollinger Bands narrow sharply?
Sharp narrowing — sometimes called a "Bollinger squeeze" — indicates a multi-period low in volatility. Markets rarely stay quiet for long, so a squeeze is often a precursor to a meaningful expansion in either direction.
Should I use volatility indicators to predict direction?
No — volatility is amplitude, not direction. They tell you how big the next move could be, not which way it will go. Combining volatility with a directional tool is the standard approach.
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Parts of this page (FAQ, introductions) are AI-assisted. Core data and statistics are algorithmically computed. All pattern definitions are human-reviewed.
Disclaimer: This page is based on publicly available market data and algorithmically generated technical analysis. It does not constitute investment advice. Historical pattern statistics do not guarantee future performance. Invest at your own risk.
Data source: EODHD · © 2026 KlineVision AI