What is Average True Range (ATR)?

What is the Average True Range (ATR): A chart indicator used in the technical analysis of financial markets. Its primary purpose is to track recent market volatility by measuring the average range of prices in a given past time period.

Category: Technical analysis indicator

How is Average True Range (ATR) Used: Average True Range (ATR) is used to gauge market volatility by measuring average price ranges over a given period of time. Typically, ATR readings are used to help determine appropriate profit targets and stop loss levels that adhere to the recent market volatility environment. ATR takes the true range of the greater of: the current high minus the current low, the current high minus the previous close, and the current low minus the previous close. A moving average is then used to take the average of the past true ranges. The number of periods of that moving average can be set according to the user’s preference.

What Does Average True Range (ATR) Consist of: Average True Range (ATR) is a single line that fluctuates according to the average of the past x periods of true ranges. ATR is usually placed either above or below the price chart.

What Does the Average True Range (ATR) Look Like:

Chart of Average True Range (ATR)
Chart of Average True Range (ATR) – Source: TheTechnicals.com and TradingView

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