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How to trade with Average True Range (ATR)

Quick Summary Average True Range:

The Average True Range (Wilder) measures market volatility. High ATR values may signal market bottoms, and low ATR values may signal neutral markets.

  • During more volatile markets ATR moves up,
  • During less volatile market ATR moves down.
  • When price bars are short, means there was little ground covered from high to low during the day
  • If price bars begin to grow and become larger, representing a larger true range, ATR indicator line will rise.
  • ATR indicator doesn’t show a trend or trend duration.

How to trade with Average True Range (ATR)

  • ATR standard settings – 14. Wilder used daily charts and 14-day ATR to explain the concept of Average Trading Range.
  • The ATR (Average True Range) indicator helps to determine the average size of the daily trading range.
  • It tells how volatile the market is and how much does it move from one point to another during the trading day.
  • ATRis not a leading indicator, means it does not send signals about market direction or duration, but it gauges one of the most important market parameter – price volatility.
  • Traders use Average True Range indicator to determine the best position for their trading Stop orders – such stops that with a help of ATR would correspond to the most actual market volatility.
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About Dwipen Gogoi

Dwipen Gogoi, MBA (IB and IT) and PGDFT from Pune. (Technical Analyst of AliceBlue) I am a You Tuber, Blogger and doing Technical Analysis last 10 years in Stock, Commodity and Forex Market. i am creating various trading strategies for day traders, swing traders, scalp traders.

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