Home Market What is the Average True Range (ATR), and how does it work?

What is the Average True Range (ATR), and how does it work?


The average true Range (ATR), a technical analysis indicator used by traders to determine asset volatility over a given timeframe, is the ATR.

The ATR indicates how much the asset price moved over time and how far it could move in the future. The ATR is combined with technical indicators and oscillators by traders to help them decide when to trade volatile price swings.

What is the ATR indicator? How does it work and what are its bases? This FXOpen guide explains how to use the average true range in your trading strategies.

ATR Indicator Explained

The average true range (or ATR) is a type or moving average created by J. Welles Wilder Jr. in 1978. He explained in his book how to calculate the average true range. Technical Trading Systems: New Concepts. Wilder also invented the relative strength indicator (RSI), the parabolic stop and reverse (SAR), as well as the average directional, which are core indicators in technical analysis.

Wilder originally designed the ATR Volatility indicator to analyze commodities markets. However, it can now be applied to stocks, indices and forex pairs.

The average true range is…

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