Kaufman Efficiency & Volatility

[Darklingg]

How do the kaufman efficiency ratio and volatility fit together?

Kaufman ER = [cl(today) - cl(n days ago)] / [mean(ATR(n days))]

For instance how can I compute tomorrow's most likely absolute range (i.e abs[cl(tomorrow) - cl(today)]) knowing kaufman ER up to now?

I assume that I know ER's distribution and that it has mean M and std S

Thanks

 

[nazzdack]

Quote from Darklingg:
----how can I compute tomorrow's most likely daily range....

Instead of the "net change", i.e. the difference between today's settlement and yesterday's settlement, why not the day's total range instead, the "sigma"?

 

[Darklingg]

Quote from nazzdack:

Instead of the "net change", i.e. the difference between today's settlement and yesterday's settlement, why not the day's total range instead, the "sigma"?

What do you mean by "day's total range"?
How would it work with it instead of the absolute net change?

 

[dave4532]

Quote from Darklingg:

For instance how can I compute tomorrow's most likely absolute range (i.e abs[cl(tomorrow) - cl(today)]) knowing kaufman ER up to now?

I assume that I know ER's distribution and that it has mean M and std S

Tomorrow never comes...

 

[nazzdack]

Quote from Darklingg:
----"day's total range"?
----How would it work....

1) The daily range, the high minus the low.
2) Intra-day volatility can shake you out of a position before the day's close.

 

[Darklingg]

Quote from nazzdack:

1) The daily range, the high minus the low.
2) Intra-day volatility can shake you out of a position before the day's close.

Alright.

So how can I estimate tomorrow's most likely total range based on Kaufman ER up to today?

 

[nazzdack]

Quote from Darklingg:
----how can I estimate tomorrow's most likely range....
----Kaufman ER....

1) Price multiplied by implied volatility divided by either the square root of 256 or 365.25 equals sigma.
2) The Kaufman "thing" does not figure into it.