ATR Technical Analysis & ATR Trade Signals

Developed by J. Welles Wilder

This indicator is a measure of volatility - it measures the range of trading price movement for a particular stock indices trading price period. The ATR is a directionless indicator and it does not determine the direction of the Indices trend.

High ATR values

High Average True Range indicator values indicated market bottom after a sell off.

Low ATR values

Low Average True Range values showed extended periods of sideways trading price movement- Price Range, such as those found at market tops and consolidation periods. Low ATR values are typical for the periods of sideways movement of long duration which happen at the top of the trading market and during consolidation.

Calculation

This technical indicator is calculated using the following:

• Difference between the current high and the current low

• Difference between the previous closing price & the current high

• Difference between the previous closing price & the current low

The final Average is calculated by adding these values & calculating the average.

Technical Analysis & How to Generate Trading Signals

Average True Range indicator can be analyzed using the same principles as other volatility technical indicators.

Possible trend change signal - The higher the value of the indicator, the higher the probability of a indices trend change;

Measure of trend momentum - The lower the indicator’s value, the weaker the trend movement.

Technical Analysis in Stock Indices Trading