what does atr mean in forex

traders. Key Takeaways, average true range aTR ) is a technical indicator measuring market volatility. Calculating Volatility with Average True Range. Lets have a look at the Average True Range in action on recent charts. ATR, and a low volatility stock has a lower ATR. It was originally developed for use in commodities markets, but has since been applied to all types of securities. Its now time to bury the Average True Range and let it rest in peace. Instead, ATR readings should always be compared against earlier readings to get a feel of a trend's strength or weakness. Originally it was created for the commodities market, which is subjected to much more volatile movements than. For example, we can subtract three times the value of the ATR from the highest high since we entered the trade.

Traders rarely use the indicator to discern future price movement directions, but use it to gain a perception of what recent historical volatility is in order to prepare an execution plan for trading. The true range indicator is taken as the greatest of the following: current high less the current low; the absolute value of the current high less the previous close; and the absolute value of the current low less the previous close. Investopedia, where: TRi a particular true range; and n hopkinton forex trading & investment llc the time period employed (which is usually 14 days). The condensed formula looks like this. The ATR is fairly simple to calculate and only needs historical price data. The point I am trying to make is why use the data on the chart, filter it down and then use that second hand information to make trading decisions from.

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