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The Average true range (ATR) is a technical analysis volatility indicator originally developed to simply measure the degree of price volatility. The indicator does not provide an indication of price trend.
ATR is one of the main indicators used in FXLORDS’ Forex Managed Accounts.
In Forex Trading, this indicator measures the amount of volatility in financial markets. It was presented by Welles Wilder in his book “New concepts in technical trading systems.” This indicator has been used as part of many other trading systems since then.
The Average True Range can drop to very low value often after a significant drop in price, which usually happens as a result of panic or hunting stop loss orders (Risk Liquidation) in the financial markets, and is considered the most important shortcomings of the index. Low values on this indicator are typically idol for trading ranges or prices consolidate. The Average True Range can be also explained according to the same principle of other oscillators, which could be formulated as follows: When the indicator’s value rises, then the likelihood of a change in direction also gets higher, and when the indicator’s value are small, then it is less likely for the price to change its direction, and thus indicates trading within ranges.
