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Average True Range - ATR Analysis and ATR Signals

Created and Developed by J. Welles Wilder

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

Average True Range (ATR) - Average True Range ATR Analysis

High ATR indicator values

High Average True Range values indicated market bottoms after a sell-off.

Low ATR readings

Low ATR values showed extended periods of sideways price movement - Price Range Bound Movement, like the ones which are found at market tops and market consolidation periods. Low ATR technical indicator values are typical for periods of sideways market movement of a long duration of time which happens at the top of the market trend and during consolidation phases.

Calculation

This technical indicator is calculated using the following formula:

  • Difference between the present high and the current low

  • Difference between the previous closing price and the current high

  • Difference between the previous closing price and the current low

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

FX Analysis & Generating Signals

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

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

Measure of the trend energy - The lower the indicator's value, the weaker the price trend move.

Average True Range (ATR)- Sell and Buy Trading Signals - Average True Range ATR Technical Analysis

Analysis in FX Trading

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