Definition of Average True Range (ATR)
The Average True Range (ATR) is a technical indicator used to measure market volatility, typically using the average of true ranges from 14 periods that can be daily, weekly, monthly, or even intraday values.
The formula for ATR is:
ATR = Previous ATR (n - 1) + True Rangen / n
n= number of periods
True Range = The greater/highest of these:
- High - low (Day 1)
- Absolute value of (Day 1’s high - Day 0’s close)
- Absolute value of (Day 1’s low - Day 0’s close)
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