Average True Range (ATR) is an indicator that measures the volatility of the market. It is usually a 14-day Moving Average of the True Range. True Range (TR) in its turn is defined as the largest difference of today's high and today's low, today's high and yesterday's close and today's low and yesterday's close. The larger the TR, the greater the volatility of the instrument; the lower the TR, the lower the volatility.
Methods of use:
| 1. | The value of this indicator is usually high when prices change sharply. |
2. If the value of this indicator is not high, the prices stay stable.
3. Before a significant rise/fall in prices, the value of this indicator is usually low/high.
Note: Since ATR shows volatility as an absolute level, low price instruments have lower ATR levels than high price instruments.
