Volatility indicator Average True Range (ATR)

Average True Range (Average True Range, abbreviated to ATR) - stock exchange technical indicator, including for the market, reflecting volatility movement of the asset. The author of this indicator was Wells Wilder and described it in the book "New Concepts of Technical Trading Systems". At the moment ATR is actively used by traders and is used in many trading strategies.

The ATR indicator is standard for MetaTrader 4 trading terminal.

Using the ATR indicator

Reflecting its purpose, Average True Range indicatorAs a rule, volatility reaches high values at the moment of strong growth or fall of a stock exchange instrument, when either panic selling or active buying takes place. At this time volatility on the exchange is maximum.

Low values ATR indicator correlate with long periods of sideways, neutral movement, which are characteristic for the market in moments of waiting for important news or absence of large capital.

ATR can be used in the same way as other volatility indicators. The principle of forecasting is as follows: the higher the ATR value, the higher the volatility, and hence the probability of change in the trend movement; the lower the indicator value, the weaker the trend direction.

Formula for calculating the Average True Range (ATR) indicator

The true range is the largest of the following values:

- the difference between the current maximum and minimum;
- the difference between the previous closing price and the current high;
- the difference between the previous closing price and the current low.

ATR - is the moving average of the true range values.