1. ATR

This is definitely the indicator we need to mention first. Because this is a popular indicator of price volatility in the trading world. And the most common setting for measuring average price volatility is 14 days.

ATR measures the price movement of the market, it does not give us information about the direction of the price or the direction of the market. So we need to use ATR as a signal to recognize the volatility of the market. You see the chart below:

When the ATR increases, which proves that volatility increases, the market moves from an accumulation and sideways phase to a more volatile market. And here is a strong trending market.

2. Bollinger Bands

The Bollinger Bands indicator is calculated based on the distance of the price from the moving average over a certain period of time, usually 20 days.

The Bollinger Bands indicator provides traders with both the direction of the price and the extent of price movements.
As the price action moves high, the upper and lower bands expand. And when the price is less volatile or low volatility, the bands tighten.

As the price moves in a trend, the bands expand and slope up or down in the same direction, as shown in the area marked with the letter "A".

As long as the price continues to touch the upper or lower bands, the trend is likely to remain strong. But once the price breaks out of the 2 bands, it is likely that the market will go into an accumulation phase or go sideways.

As the chart above can clearly see a transition from a trending market (A) to a sideways market (B).

At C, the market once again changes to a trending market and the price continues to stick to the upper band, indicating that the uptrend is strong.

At D, the market is more volatile because more important news and events are announced at this point. And at this point we see the price going slightly sideways and then reversing.

When using Bollinger Bands, we should

Waiting for the price to move out of the bands shows the price with higher volatility than usual.

Price tends to return to the area around the 20 moving average.

Also, look for a price pattern to show a signal of price reversal.

Bollinger Bands and ATR are indicators that provide information about price movements, however, both these indicators should not be used independently. For a methodical strategy, we should seek support from other indicators or incorporate price action that would be better.

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