Volatility Indicators

Five indicators that quantify volatility — how much price moves, how much it's expected to move, and where the statistical bounds of "normal" movement sit. The cleanest split in the indicator library: trend and oscillator indicators describe direction; volatility indicators describe magnitude.

These are the indicators that most directly affect every other part of a strategy. Position sizing scales with ATR. Stops widen and tighten with volatility regime. Breakout strategies require volatility expansion to work. Mean reversion needs volatility contraction.

At a glance

How to choose

You need to size stops or positions to current volatility. ATR. It's the single most-used indicator in this category and the one referenced by every other indicator in this section (Keltner uses it internally; Bollinger Bandwidth correlates with it; Supertrend is built on it). If you can only have one volatility indicator, this is it.

You want statistical extreme levels for mean reversion. Bollinger Bands. Standard-deviation envelopes around an SMA. ±2σ captures ~95% of price action under normal conditions, so touches of the bands flag genuinely unusual readings.

You want breakout-friendly volatility envelopes. Keltner Channel. ATR-based bands around an EMA. Smoother in trends than Bollinger because ATR doesn't expand as dramatically as σ does during volatility spikes — cleaner breakout signals.

You want hard, structural breakout levels. Donchian Channels. Literally the highest high and lowest low — no smoothing, no statistics. The foundation of the classic Turtle Traders system.

You need to detect volatility changes (expansion vs. contraction). Chaikin Volatility. Tells you whether volatility is increasing or decreasing — which ATR doesn't, by itself.

You don't know which to pick. ATR. Use it for sizing and stops. Add a channel indicator (Bollinger for ranges, Keltner for trends, Donchian for clean breakouts) only when you specifically need envelope levels for entry signals.

The three jobs a volatility indicator does

Volatility indicators in trading do one of three jobs. Picking the right indicator means matching the indicator to the job:

Job 1: Sizing inputs (stops, targets, positions)

You need a single number representing current volatility. ATR does this perfectly. The output is in price-units (points/dollars/cents) so it plugs directly into stop-distance and position-size math.

Avoid using Bollinger Bandwidth or Keltner Width for sizing — they're tied to specific moving averages and aren't as portable across strategies.

Job 2: Envelope levels (entry / exit signals)

You need explicit upper and lower bounds to trade against. The three channel indicators all do this:

• Bollinger for statistical "this is unusual" levels (mean reversion).
• Keltner for trend-relative bands that don't whipsaw during volatility (breakout / pullback).
• Donchian for the structurally cleanest "new high / new low" levels (classic trend following).

Job 3: Regime detection

You need to classify the current market as quiet, expanding, or contracting. Chaikin Volatility is purpose-built for this — its positive/negative readings directly indicate expansion vs. contraction. ATR's slope output is a simpler alternative.

For more nuanced regime classification, combine ATR's level (high vs. low) with Chaikin Volatility's direction (expanding vs. contracting). The four quadrants (quiet+expanding, quiet+contracting, loud+expanding, loud+contracting) each have different strategy implications. See market regimes.

Common patterns

ATR-scaled stops with band-based entries. Use Bollinger or Keltner band touches as the entry signal. Use ATR × multiplier as the stop distance. Two indicators, two distinct jobs, no overlap. The most common combination in production strategies.

Squeeze detection with breakout entry. Track Bollinger Width or Keltner Width — when it falls below its own 50-bar average, volatility is compressed. Arm a directional entry that fires when price closes outside the channel. The famous "TTM Squeeze" pairs Bollinger and Keltner channels to detect this even more precisely.

Multi-timeframe volatility. Higher-timeframe ATR for position sizing (weekly volatility regime). Execution-timeframe ATR for stop distance (hourly volatility for current trade). Two different ATR jobs, two different timeframes. See the multi-series Visual Builder pattern.

Volatility-adjusted strategy switching. Use Chaikin Volatility (or ATR's slope) as a regime classifier driving a Conditional Flow node — when volatility expanding, run trend strategies; when contracting, run mean-reversion strategies. See market regimes.