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Percent High Low Range as a measure of stock volatility
The High-Low range technical indicator returns the percentage of maximum increase in a stock or security during the previous N trading days. To measure this, it calculate the percentage increase during the previous N bars from the lowest value to the highest value, that is, the highest value over a specified period (HHV function) divided by the lowest value over a specified period (LLV function).
This technical analysis tool can be used as a measure of the volatility of a stock. The higher the returned value is the wider the movement of the stock was in the previous N bars.
The trading indicator allows you to enter the period that is used to compute the percentage increase from the high price to the low price. To use a 20 bar period, you may type:
HighLowRange(20)
In a trend following system, a great way to detect stocks that are trending with little volatility is to search for the ones that, during a specific period, are increasing with a low high-low range value.
Example of trading rules:
Stock increased by more than 10% during the previous 30 trading days (perf(close, 30) > 10)
Stock has a high-low percentage range value lower than 10%. Stock with little volatility. (HighLowRange(30) < 10)
When creating a system using these trading rules, the application will only use stocks that have been increasing steadily with very little volatility over the preceding 30 bars.
For a short trading system, you can screen for stocks that decreased by a specific percentage amount during the last N days and that have a very low high-low percentage range.
