Average True Range - ATR Technical Analysis and ATR Forex Trading 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 Forex trend.
High ATR values
High Average True Range 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 and during consolidation.
Calculation
This indicator is calculated using the following:
- Difference between the current high and the current low
- Difference between the previous closing price & the current high
- Difference between the previous closing price and the current low
The final Average is calculated by adding these values & calculating the average.
FX Technical Analysis & Generating Forex Trading Signals
Average True Range can be interpreted using the same principles as other volatility indicators.
Possible trend change signal - The higher the value of the indicator, the higher the probability of a trend change;
Measure of trend momentum - The lower the indicator’s value, the weaker the trend movement.
Technical Analysis in FX Trading
