|
Average True Range
Average True Range (ATR) is a volatility indicator.
It is also used as part of other trading systems such as Starc Bands
and Keltner Channels.
Overview
- ATR provides a measure of volatility.
- ATR is calculated as the moving average of true price ranges
over a given period.
- Developed by Welles Wilder and first described in his 1978
book New Concepts in Technical Trading Systems
Interpretation Average True Range is a moving
average of the True Range over "X" periods, usually 14-days. True
Range is the greatest difference from the following choices:
- Today's high and today's low.
- Today's high and yesterday's close, or
- Today's low and yesterday's close.
True range is always a positive number (negative
numbers from the calculation above are to be ignored).
Major tops are typically accompanied by high volatility
during the blow-off phase of a market, as investors become more
and more nervous and ready to take profits. Major bottoms are usually
calmer, with low volatility, as the hopes for quick profits
have faded.
Signals
High ATR values are often correlated with high
volatility as prices bottom and there is a sell off.
Low ATR values are often correlated with low
volatility as prices stabilize or move into a sideways channel prior
to a possible breakout.
Further Information
Also see Keltner Channels.
Interpretation
The Swing Index alone doesn't provide much in the
way of signals. It should be used in conjunction with the Accumulative
Swing Index.
See the Accumulative Swing Index.
|
6.63
-0.54
