ATR

ATR stands for “Average True Range“. It is an indicator which measures a market volatility. ATR is calculated as exponential moving average (EMA) of “TrueRange” values. An advantage of this indicator is that ATR is a time variable and reflects current market dynamics. It is applicable to many strategies, e.g. for setting up Profit Target, Stop Loss, etc. as a multiplicator of ATR value. Many traders use ATR in breakout strategies for setting up an entry level from pre-defined value (e.g. an entry value for BUY long can be set as an arithmetic average of last 10 CLOSE values plus ATR(7)).

For the first time this indicator was introduced by J. Welles Wilder Jr. in the book „New Concepts in Technical Trading Systems“.

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