Average True Range (ATR)

The Average True Range is an indicator used to determine market volatility; it measures how much price moves on average over a given period. Welles Wilder introduced it in his book “New Concepts in Technical Trading Systems.”

To calculate the ATR, we first need to find True Ranges (TR) for a given period. Where TR is the greatest of the following:

The distance from today’s high to today’s low. The distance from yesterday’s close to today’s high. The distance from yesterday’s close to today’s low The Average True Range is then calculated as the moving average of the True Ranges.