Average True Range (ATR)

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The Average True Range(ATR)  indicator is used to calculate what the volatility of the market is. It is well known that traders love volatility ,in order to make quick returns, and therefore it is important to test that the market is volatile enough for you to trade it.

What the ATR shows is the average price movement the market has traded over a given period of time.   The higher the ATR the more volatile the market is

atr

Note that unlike the Average Directional Index (ADX) indicator, the ATR does not have a fixed benchmark that can be used to determine if there is little or a lot volatility. Its values need to be compared over time to see if it is increasing or decreasing.

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