Average True Range ATR Technical Analysis & ATR Signals

Developed by J. Welles Wilder

This indicator is a measure of volatility - it measures the range of price movement for a particular price period. The ATR is a directionless indicator and it does not determine the direction of the market trend.

High ATR values

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

Low ATR values

Low Average True Range values showed extended periods of sideways price movement- Price Range, such as 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 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 and How to Generate Signals

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

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

Measure of trend momentum - The lower the indicator’s value, the weaker the trend movement.

Technical Analysis in Gold