TOS Script - Average True Range

John Person talks about using the average true range in his book Mastering the Stock Market: High Probability Market Timing and Stock Selection Tools 

Source: Mastering the Stock Market:

How much can a market move on any given day? The average true range (ATR) provides insight into how much the market can move, based on past and current market data. The true range equals the greatest of the following:

• The difference between today's high and today's low.
• The difference between today's high and yesterday's close (if market gaps higher).
• The difference between today's low and yesterday's close (if market gaps lower).

This script creates a label to show the True Range Average over past period and percentage of underlying. The ATR may help you understand the nature of a market's potential move. This may also aid you in being overexposed to leveraged positioning, which leads to excessive risk taking. True range can be used to help setup stop losses targets.

Script http://tos.mx/cxFVUq

#Shows the average of the true range for a period and percent of range relative
#to the underlying.

declare upper;

input length = 10;
input displace = 0;

def Range = TrueRange(High, Close, Low);


def RangeAvg = Average(Range[-displace], length);

AddLabel(yes, "Avg Range past 10 periods: " + Round(RangeAvg,2) + " PCT: " + Round((RangeAvg/Close*100.0),2) + "%", Color.ORANGE);