Average True Range (ATR)

What is the definition of Average True Range (ATR)?

Average true range (ATR) is a technical analysis volatility indicator originally developed by J. Welles Wilder, Jr. for commodities. The indicator does not provide an indication of price trend, simply the degree of price volatility. The average true range is an N-day exponential moving average of the true range values. Wilder recommended a 14-period smoothing, which is what we use.

The true range is the largest of the:

  • Most recent period's high minus the most recent period's low
  • Absolute value of the most recent period's high minus the previous close
  • Absolute value of the most recent period's low minus the previous close

Stockopedia explains Average True Range (ATR)...

The idea of ranges is that they show the commitment or enthusiasm of traders. High ATR values indicate high volatility and may be an indication of panic selling or panic buying. Low ATR readings indicate sideways movement by the stock or waning interest.

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