What is ATR Average True Range?
market volatility indicator, derived from the 14-day simple moving average, Shows average range prices swing for an investment over a specified period default 14 days.
HOw it works?
ATR takes into account gaps in price movement and previous closing prices to account for price gaps
new average true range is calculated every day on a daily chart and every minute on a one-minute chart.
he Average True Range (ATR) Formula
ATR = (Previous ATR * (n – 1) + TR) / n
Where:
ATR = Average True Range
n = number of periods or bars
TR = True Range
The True Range for today is the greatest of the following:
- Today’s high minus today’s low
- The absolute value of today’s high minus yesterday’s close
- The absolute value of today’s low minus yesterday’s close
How To Calculate The ATR
calculation of ATR range is 14-period based, To calculate the current average true range, you need to calculate the prior ATR and current TR. The current TR is the highest number of three true ranges.
- Current high minus current low.
- Current high minus the previous period’s close.
- Current low minus the previous period’s close.
The ATR Indicator formula:
Current ATR = ((Prior ATR x 13) + Current TR) / 14
HOW to use ATR indicator?
its mesures only volatlity, The ATR is typically set to 14 periods which means that the ATR looks at the range of candlestick size over the last 14 candlesticks.
