Showing posts with the label average-true-range-interpretation


AVERAGE TRUE RANGE Average True Range or ATR is a measurement of volatility. It measures the average of true price ranges over time. The true range is the greatest distance between today’s high to today’s low, yesterday’s close to today’s high, or yesterday’s close to today’s low. The ATR is a moving average of the true ranges. High ATR values often occur at market bottoms following a panic sell-off. Low ATR values are often found during extended sideways movements, like those found at market tops or after consolidation periods. The ATR can be used in a channel breakout method of trading by adding or subtracting from the previous bar’s close or the current bar’s open. Now for those of us who do not have the engineer mind, the ATR tells me what the average daily travel distance (up or down) is for a stock or index for a select number of days, which for me is currently based on a 15 day parameter. As an example: if the chart is giving me a number of $1.75 for XYZ stock,