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Average True Range ATR Technical Analysis & ATR Signals

Developed by J. Welles Wilder

This technical indicator is an estimate of the market volatility - it gauges the range of the price movement for a particular price period. The ATR is a directionless indicator and it does not determine/figure out the direction of the market trend.

Average True Range Technical Indicator - Average True Range (ATR) Indicator Tutorial for Beginner Traders

High ATR values

High ATR indicator readings indicated market bottoms after a sell off.

Low ATR indicator values

Low Average True Range values showed extended periods of sideways price movement- Price Range, such as and like those found at market tops and consolidation periods. Low ATR values are typical for the periods of sideways movement of long duration which happen at the top of the market & during consolidation.

Calculation

This technical indicator is calculated using the following:

  • Difference between the current high & the current low

  • Difference between previous closing price & the current high

  • Difference between previous closing price & the current low

The final Average is calculated by adding these values & calculating the average.

Technical Analysis & How to Generate Signals

ATR technical indicator can be analyzed using the same principles as the other volatility indicators.

Possible market trend change and reversal signal - The higher the value of technical indicator, the higher the probability of a market trend change;

Measure of the trend force - The lower the technical indicator's value, the weaker the trend movement.

Place Average True Range (ATR) Indicator on Chart

Technical Analysis in Gold

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