Indicators
ATR or Average True Range is one of the indicators that were made by
Welles Wilder and is often used to measure the volatility of the market. ATR is an average value (moving average) of the actual range (true range) in a given period. True range is calculated from the highest value among the three circumstances:
1. TR = H - L
2. TR = H - Close
3. TR = Close - Low
where TR: true range, H: The highest price during the period, L: the lowest prices in the period, and the Close: closing price of the previous period. ATR is the average value in the period.
Trader typically uses 14 periods daily. Examples ATR indicator display (14) on the daily time frame is as follows:
ATR indicator reading
As already mentioned, the ATR is often used to measure the volatility of the market. Low ATR values indicate low market volatility, otherwise high ATR values indicate high volatility of the market is. When market volatility is high, the ATR moves upward and when volatility is declining ATS moving downward.
The above examples is ATR (14) in the EUR / USD daily. Bars candlestick price movements in the A and B seemed short, which shows the volatility of the market is low, the ATR moves downtrend. Bars on the A and B show low daily range. In contrast to the C, daily range increases with the length of the bar candlestick price movements. ATR market volatility rises and moves uptrend. ATR value remains high during the market volatility is still high.
In this case ATR indicator does not indicate the direction of price movement trends or the length of the trend, and not at all not related to the direction of price movement. Therefore, on this indicator Metatrader platform is classified in the indicator oscillators. To use the ATR indicator on Metatrader, you can go to Insert - Indicators - Oscillators - Average True Range.
Examples of the use of indicator ATR: determining the level of stop loss
ATR is a lagging indicator, or that occur after price movements, so it can not be used to predict future price movements. Trader often use ATR to determine the stop loss level is based on the high and low volatility at the time he entered the market.
Determining the ATR stop loss with a very logical and easy to understand. With market volatility is high traders will not necessarily determine a strict stop loss, otherwise when market volatility is low stop loss would not be too wide.
If you sell entry at the current price (image above), then the stop loss level can be determined at 2 ATR. In the example of EUR / USD daily ATR above are at 0.0100 or 100 pips, then the stop loss could be determined at 2 x 100 pip = 200 pips.
1. TR = H - L
2. TR = H - Close
3. TR = Close - Low
where TR: true range, H: The highest price during the period, L: the lowest prices in the period, and the Close: closing price of the previous period. ATR is the average value in the period.
Trader typically uses 14 periods daily. Examples ATR indicator display (14) on the daily time frame is as follows:
ATR indicator reading
As already mentioned, the ATR is often used to measure the volatility of the market. Low ATR values indicate low market volatility, otherwise high ATR values indicate high volatility of the market is. When market volatility is high, the ATR moves upward and when volatility is declining ATS moving downward.
The above examples is ATR (14) in the EUR / USD daily. Bars candlestick price movements in the A and B seemed short, which shows the volatility of the market is low, the ATR moves downtrend. Bars on the A and B show low daily range. In contrast to the C, daily range increases with the length of the bar candlestick price movements. ATR market volatility rises and moves uptrend. ATR value remains high during the market volatility is still high.
In this case ATR indicator does not indicate the direction of price movement trends or the length of the trend, and not at all not related to the direction of price movement. Therefore, on this indicator Metatrader platform is classified in the indicator oscillators. To use the ATR indicator on Metatrader, you can go to Insert - Indicators - Oscillators - Average True Range.
Examples of the use of indicator ATR: determining the level of stop loss
ATR is a lagging indicator, or that occur after price movements, so it can not be used to predict future price movements. Trader often use ATR to determine the stop loss level is based on the high and low volatility at the time he entered the market.
Determining the ATR stop loss with a very logical and easy to understand. With market volatility is high traders will not necessarily determine a strict stop loss, otherwise when market volatility is low stop loss would not be too wide.
If you sell entry at the current price (image above), then the stop loss level can be determined at 2 ATR. In the example of EUR / USD daily ATR above are at 0.0100 or 100 pips, then the stop loss could be determined at 2 x 100 pip = 200 pips.
Weaknesses: Because its function only as a marker of price changes, the most important weakness is no information whether the trend is happening up and down trend. These indicators are also considered a lagging indicator (follower). Therefore, this indicator is difficult to be used as a predictive tool.
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