ThE hAnDbook of TEChnICAl AnAlysIs(2) The second Measure of Volatility: Volatility as the
Maximum amount of price Change over a specified
duration
Refer to Figure 21.1 again. If we now employ the second measure of volatility,
that is, the maximum amount of price change over equal durations, then Stock
B would be considered more volatile, as the amount of price change over the 10
periods was $20 − $2 = $18, whereas the amount of price change for Stock A was
only $10 − $1 = $9. (Note that all volatility measures must be made over equal
durations for proper comparison.)
By applying the second measure of volatility to the example in Figure 21.3,
we observe that we could not determine which stock was more volatile since the
maximum amount of price change over equal durations were the same for both
figure 21.8 Trend Rate Change Indicating Potential Volatility on the Daily Gold Chart.
Source: MetaTrader 4
figure 21.9 Trend Rate Change Indicating Potential Volatility on the Daily 3M Co.
Chart.
Courtesy of Stockcharts.com