## What will we cover?

In this tutorial we will learn about the volatility of a stock price measured with Average True Range. The **Volatility** of a stock is one measure of **investment risk**.

The **Average True Range** was originally designed to calculate the volatility of commodities, but the technical indicator can also be used for stock prices, as we will do in this tutorial.

We will get some stock price time series data and make the calculation using pandas DataFrames and NumPy.

## Step 1: Get historic stock price data

To get started, we need some historic stock prices. This can be done as follows and is covered in Lesson 1.

```
import numpy as np
import pandas_datareader as pdr
import datetime as dt
import pandas as pd
start = dt.datetime(2020, 1, 1)
data = pdr.get_data_yahoo("NFLX", start)
```

This reads the time series data of the historic stock prices of **Netflix** (ticker **NFLX**).

## Step 2: The formula of Average True Range (ATR)

## Sted 3: The calculations of Average True Range with DataFrames and NumPy

The above formula can look intimidating at first, but don’t worry, this is where the power of **Pandas** **DataFrames** and **Series** come into the picture.

It is always a good idea to make your calculations simple.

```
high_low = data['High'] - data['Low']
high_cp = np.abs(data['High'] - data['Close'].shift())
low_cp = np.abs(data['Low'] - data['Close'].shift())
```

Here we make a **Series** for each of the values needed. Notice, that we get the previous close by using **shift()** (**data[‘Close’].shift()**).

Then a great way to get the maximum value of these is to create a DataFrame with all the values.

```
df = pd.concat([high_low, high_cp, low_cp], axis=1)
true_range = np.max(df, axis=1)
```

Now that is nice.

Then we get the ATR as the moving average of 14 days (14 days is the default).

```
average_true_range = true_range.rolling(14).mean()
```

## Step 4: Visualize the result with Matplotlib

Finally, let’s try to visualize it. Often visualization helps us understand it better.

```
import matplotlib.pyplot as plt
%matplotlib notebook
fig, ax = plt.subplots()
average_true_range.plot(ax=ax)
ax2 = data['Close'].plot(ax=ax, secondary_y=True, alpha=.3)
ax.set_ylabel("ATR")
ax2.set_ylabel("Price")
```

Resulting in the following chart.

## Want to learn more?

This is part of a full video course consisting of 8 lessons and 2.5 hours of video content.