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Average True Range (ATR) Indicator

The Average True Range is an indicator developed by J Welles Wilder. ATR is a tool for measuring volatility. The volatility of gaps and limit moves are also included in the role of ATR. It is an important reminder to know that ATR does not give an indication of price direction, only provides volatility. The ATR is a moving average, used with generally 14 days of the true ranges.

 

Average True Range (ATR) Indicator Calculation

The ATR consists of three values. They assist identifying the volatility of a security.

  1. Current Day’s Range

Current High – Current Low

  1. Security increased from the previous day’s close

Current High – Previous Close

  1. Security decreased from the previous day’s close

Current Low – Previous Close

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