Volatility – The Meaning of N
The Turtles used a concept that Richard Dennis and Bill Eckhardt called N to represent the underlying volatility of a particular market.
N is simply the 20-day exponential moving average of the True Range, which is now more commonly known as the ATR. Conceptually, N represents the average range in price movement that a particular market makes in a single day, accounting for opening gaps. N was measured in the same points as the underlying contract.
To compute the daily true range:
N is simply the 20-day exponential moving average of the True Range, which is now more commonly known as the ATR. Conceptually, N represents the average range in price movement that a particular market makes in a single day, accounting for opening gaps. N was measured in the same points as the underlying contract.
To compute the daily true range:
True Range = Maximum (H-L, H-PDC, PDC-L)
where:
H – Current High
L – Current Low
PDC – Previous Day’s Close
To compute N use the following formula:
N = (19 x PDN + TR)/20
where:
PDN – Previous Day’s N
TR – Current Day’s True Range
Since this formula requires a previous day’s N value, you must start with a 20-day simple average of the True Range for the initial calculation.
where:
H – Current High
L – Current Low
PDC – Previous Day’s Close
To compute N use the following formula:
N = (19 x PDN + TR)/20
where:
PDN – Previous Day’s N
TR – Current Day’s True Range
Since this formula requires a previous day’s N value, you must start with a 20-day simple average of the True Range for the initial calculation.
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