ThE hAnDbook of TEChnICAl AnAlysIs- The degree of interval activity over equal durations
- The degree of relative interval activity over equal durations
Volatility in price may also be classified as:■ (^) Directional, trend, or vectorial
■ (^) Non‐directional, range, or scalar
The following are a few examples to help illustrate the various modes of vola-
tility measure.
(1) first Measure of Volatility: Volatility as the Change in
the rate of Change in price over a specified duration
The first way to quantify volatility is by the change in the rate of change in price.
See Figure 21.1.
From Figure 21.1 we observe two stocks rising in price, with Stock A moving
from $1 to $10 and Stock B moving from $2 to $20, over the same duration of
10 periods.
Let n represent the period. Therefore, price change from one period to the next
is just:
PC Price Pricen=−n n− 1
The rate of change (ROC) of price change is also tabulated, and is calculated
(as a percentage) as:
ROC of PC=−(PCnnPC− 1 ) / n− 1 ×100PC percent
Figure 21.2 shows the two stocks rising at different changes in price per pe-
riod. Applying the first measure of volatility, which is the change in the rate of
change in price, we find that both stocks are rising at constant rates. This means
figure 21.1 Table of Hypothetical Stock Prices and Rates of Change.