Average True Range - ATR


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.

BREAKING DOWN '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.

  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  2. Wide-Ranging Days

    A description of the price range of a stock on a particularly ...
  3. Outside Days

    A term employed by market technicians and day traders. Outside ...
  4. Inside Days

    A charting term used by technical analysts and day traders. Inside ...
  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. Mutual Funds & ETFs

    Surf's Up With Filtered Waves

    With an appropriate filter, you can ride the waters to rising profits.
  6. Active Trading

    Enter Profitable Territory With Average True Range

    Find entry or exit signals or develop a complete system based on this versatile tool.
  7. Chart Advisor

    These Oil & Gas Stocks Have Reversed

    It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
  8. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  9. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  10. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  1. How do I use Volatility Ratio for creating a forex trading strategy?

    The volatility ratio can be used when analyzing currency pairs in much the same way as stocks. A forex trader can use it ... Read Full Answer >>
  2. What is a common strategy traders implement when using the Volatility Ratio?

    The volatility ratio is a tool that a trader can use to identify whether the price of a stock has been trading out of its ... Read Full Answer >>
  3. What is a common strategy traders implement when using STARC Bands?

    Stoller Average Range Channels (or STARC), Bands were created by Manning Stoller in the 1980s to help generate trading signals ... Read Full Answer >>
  4. Why are STARC Bands important for traders and analysts?

    STARC bands, or Stoller average range channels, provide traders and market analysts with indications of the level of volatility ... Read Full Answer >>
  5. What are the main differences between STARC Bands & Bollinger Bands®?

    STARC Bands and Bollinger Bands have very similar analytical goals but vary in their method of achieving them. Both STARC ... Read Full Answer >>
  6. Who developed the relative strength index (RSI)?

    J. Welles Wilder, Jr. created the relative strength index (RSI) following a career in mechanical engineering and real estate. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!