Trade Forex Trading

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 & it does not determine/figure out the direction of the market trend.

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

High ATR readings

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 - Range Bound Price, like those found at market tops and consolidation market periods. Low ATR readings are typical for the periods of sideways movement of long duration which happens at the top of the market and during consolidation.

Calculation

This technical indicator is calculated using the following:

  • Difference between the current high & the current low

  • Difference between previous closing price and the current high

  • Difference between previous closing price & the current low

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

Technical Analysis and 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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