It uses the standard deviation of the ATR to filter an , and uses this as the mean. It then only plots > or < 0 if price is more than one x ATR away from the mean. If index is positive, the background turns green, meaning price is more than 1 x ATR above the mean. If the index is negative, the background turns red, meaning price is more than 1 x ATR below the mean. This setting can be changed by changing the setting "ATR Multiplier", but the default is 1 x ATR.
There are two main ways to use this index.
1. Use it aggressively to find trends (by combining it with other indicators) by entereding each time the background changes color to green for longs or red for shorts.
2. Use it spot breakouts, waiting for a pullback, and then entering on the next move in the same direction. In this context for a short, you wait for the background color to turn green, then wait for the index to pull back, and then enter once it starts moving up again.
so it'll be useful in scalps and swing trading for max profits.
Thank you sir.