Average True Range - ATR

AAA

DEFINITION of 'Average True Range - ATR'

A measure of volatility introduced by Welles Wilder in his book: New Concepts in Technical Trading Systems.

The true range indicator is the greatest of the following:
-current high less the current low.
-the absolute value of the current high less the previous close.
-the absolute value of the current low less the previous close.

The average true range is a moving average (generally 14-days) of the true ranges.

INVESTOPEDIA EXPLAINS 'Average True Range - ATR'

Wilder originally developed the ATR for commodities but the indicator can also be used for stocks and indexes. Simply put, a stock experiencing a high level of volatility will have a higher ATR, and a low volatility stock will have a lower ATR.

RELATED TERMS
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  2. Inside Days

    A charting term used by technical analysts and day traders. Inside ...
  3. Outside Days

    A term employed by market technicians and day traders. Outside ...
  4. Wide-Ranging Days

    A description of the price range of a stock on a particularly ...
  5. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
Related Articles
  1. Trading Strategies

    Using Compound Indicators To Predict Market Fluctuations

    Learn how to combine average true range, simple moving average and Bollinger band indicators to gauge market volatility.
  2. Active Trading

    Range Bar Charts: A Different View Of The Markets

    While range bars are not a type of technical indicator, traders can employ this useful tool to identify trends and interpret volatility.
  3. Forex Education

    Range Trade Forex With Non-U.S. Dollar Pairs

    If you are following a range-trading strategy, you're better off with pairs that do not include the U.S. dollar. Find out why.
  4. Options & Futures

    Measure Volatility With Average True Range

    Find more profitable entry and exit locations with this standard indicator.
  5. Active Trading

    Enter Profitable Territory With Average True Range

    Find entry or exit signals or develop a complete system based on this versatile tool.
  6. Mutual Funds & ETFs

    Surf's Up With Filtered Waves

    With an appropriate filter, you can ride the waters to rising profits.
  7. Technical Indicators

    Why is the 200 Simple Moving Average (SMA) so common for traders and analysts?

    Learn about the 200 simple moving average (SMA), how it is utilized by traders and analysts, and why it is considered to represent major support or resistance.
  8. Trading Strategies

    How do I build a profitable strategy when spotting a Three White Soldiers pattern?

    Learn a simple trading strategy implemented based on the bullish market reversal signal given by the three white soldiers candlestick pattern.
  9. Trading Strategies

    How are Three Black Crows patterns interpreted by analysts and traders?

    Understand the basics of the three black crows pattern and how analysts and traders interpret this bearish reversal pattern when creating a trading strategy.
  10. Trading Strategies

    How effective is creating trade entries after spotting a Symmetrical Triangle pattern?

    Understand the symmetrical triangle pattern and the likely success of the most common breakout trading strategy implemented when the pattern is identified.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center