Average True Range(ATR) is a measurement of volatility. It measures the average of true price ranges over time.
The True Range is the greatest distance between:
- Today's high to today's low,
- Yesterday's close to today's high,
- Yesterday's close to today's low.
The Average True Range is a moving average of the True Ranges.
High ATR values often occur at market bottoms following a "panic" sell-off. Low Average True Range values are often found during extended sideways movement, like as those found at market tops or after consolidation periods.
True Range is used in Welles Wilder's Directional Movement indicator.
Calculation:
WWMA = Welles Wilder’s Moving Average (Wilder’s Smoothing)
PrevClose = The previous closing price
Inputs:
Period = 14
Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).
Indicator Type: Volatility