I’ve been playing around with ATRP (average true range as a percentage of price) recently and started testing it as a way to modify position size. When volatility/ATRP is low it is normally a sign that the market is topping out and when it is high it is normally a sign that a market is bottoming out. Logically if the market is topping out then it is a good time to reduce position size and if it it bottoming then it is a good time to increase position size. So ATRP helps with tuning position size. So far this theory seems to work quite well although I have only been concentrating on the FTSE100 so far.
I’d be interested in knowing if anyone else adjusts position size in a strategy successfully using an indicator?
