How Do You Read ATR Values?

The formula to calculate ATR for an investment with a previous ATR calculation is : \begin{aligned}&\frac{ \text{Previous ATR} ( n – 1 ) + \text{TR} }{ n } \\&\textbf{where:} \\&n = \text{Number of periods} \\&\text{TR} = \text{True range} \\\end{aligned}​nPrevious ATR(n−1)+TR​where:n=Number of periodsTR=True range​ If there is not a previous ATR calculated, you must use: \begin{aligned}&\Big ( \frac{ 1 }{…

Wilder originally developed the ATR for commodities, although the indicator can also be used for stocks and indices.1 Simply put, a stock experiencing a high level of volatility has a higher ATR, and a lower ATR indicates lower volatility for the period evaluated. The ATR may be used by market technicians to enter and exit trades and is a…

As a hypothetical example, assume the first value of a five-day ATR is calculated at 1.41, and the sixth day has a true range of 1.09. The sequential ATR value could be estimated by multiplying the previous value of the ATR by the number of days less one and then adding the true range for…

The average true range (ATR) is a technical analysis indicator introduced by market technician J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems that measures market volatility by decomposing the entire range of an asset price for that period.1 The true range indicator is taken as the greatest of the following: current high…

Average true range is used to evaluate an investment’s price volatility. It is used in conjunction with other indicators and tools to enter and exit trades or decide whether to purchase an asset.

The first step in calculating ATR is to find a series of true range values for a security. The price range of an asset for a given trading day is its high minus its low. To find an asset’s true range value, you first determine the three terms from the formula. Suppose that XYZ’s stock…