Knowing the Average True Range (ATR) value of a stock for a given period can be immensely helpful for you in developing trading candidates and risk-management strategies.  What are the Top Ten and Bottom Ten ATR values for stocks in the S&P 500 Index?

The Average True Range Indicator tells us the ‘average’ price movement of the last 14 days (default), which lets us know the range to expect, and also gives us a measure of volatility.  Volatility can equal risk for traders, but it can also signal plenty of opportunity for day-traders.

Let’s look at the 14 period daily ATR values (data created and sorted with TradeStation’s RadarScreen):

Top Ten ATR Values:

Before I conducted this quick test/scan, I expected Google (GOOG) to top out the stocks for the most volatilite (or have the largest daily range).  I was wrong; in fact, Chicago Mercantile Exchange (CME) topped Google by almost $4.00 per day!

My next thought was that Apple would be in the Top 5, but actually, AAPL barely squeaked into the Top 10 list, trailing Goldman Sachs (GS), Mastercard (MC) and the Washington Post (WPO – did you know it traded aboe $600 per share?).

Folks, if you are eager equity day-traders, here is your top-ten ’scalping’ list.  Capturing a $1 move with 1,000 shares (considered a ‘plunge’ position) will net you – surprise – $1,000.  That may be a lofty goal to reach, but meeting it could be easier if you play the swings in these stocks.

What stocks should day-traders absolutely avoid?

Bottom Ten ATR Values:

To be fair, I did not filter out stocks priced beneath $20 – doing so would have wiped away almost all of these stocks.

Another bonus tidbit of information is that 109 stocks in the S&P 500 Index currently trade less than $20 per share (that’s 22% of the total index).

Only 16 stocks (a mere 3%) trade greater than $100 per share (based on a closing price of July 25, 2008).

Thus, roughly 75% of all S&P stocks are between $20 and $100.

The Average True Range indicator can be useful in determining trading candidates, determining stop-loss levels (usually a function of the ATR, such as place a stop two times the value of the current ATR), determining profit targets (also a function of the ATR), or assessing volatility and range expansion.