Welles Wilder Volatility

Welles Wilder Volatility is a trend-following system. It is also a true reversal system which means that the position is reversed at every stop.

This indicator is intended to measure true range over time. The idea is if volatility is high, the range is expanding and the opposite holds.

If the dots are above the chart, this suggests that the security is in a bearish trend. Similarly if the dots are below the chart this suggests a bullish trend.

VI today = N*VI previous+TR1/X

Where VI = Volatility Index X = Time period N= Time Period-One Unit TR1 = Today's True Range