ATR indicator

Market volatility can sometimes work against the trader. ATR indicator helps to exclude periods of low market volatility.

ATR (Average True Range) is a technical analysis indicator that shows market volatility for the present moment. It is quite easy to understand — the higher the readings, the higher the market volatility. However, it should be noted that the ATR does not have constant overbought and oversold levels, although it is an oscillator.

The indicator was created by J. Wells Wilder and presented to the public in 1978. Many traders initially took it coldly, however over time it gained significant popularity. Despite the fact that the indicator allows traders to accurately predict the future price change, it will not be able to determine the trend direction. Thus, Average True Range has always been characterized as the easiest way to identify the average price range.

An important point is the fact that the ATR indicator constantly tends upwards when the price moves strongly, no matter where it goes. For example, the price is in a downtrend — the indicator goes up, in an upward trend — it is still up. What does it mean? If the indicator value falls, then the market volatility decreases. We can conclude that if the indicator is very low, then, accordingly, there is practically no volatility. The price is preparing for the upcoming breakthrough.

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