Trade Stock Indices

ATR Technical Analysis & ATR Trade Signals

Developed by J. Welles Wilder

This indicator is a measure of volatility - it measures the range of price movement for a particular stock price period. The ATR is a directionless indicator & it doesn't determine the direction of the market trend.

Average True Range (ATR) Indicator - Indices ATR Indicator Analysis

High ATR indicator 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 & consolidation periods. Low ATR values are typical for the periods of sideways movement of long duration which happen at the top of the market & during consolidation.

Calculation

This trading indicator is calculated using the following:

  • Difference between the current high and the current low

  • Difference between the prior closing price & the current high

  • Difference between the prior closing price & the current low

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

Technical Analysis & How to Generate Signals

ATR indicator can be analyzed using the same principles as other volatility trading indicators.

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

Estimate of trend momentum - The lower the trading indicator's value, the weaker the market trend movement.

Average True Range (ATR)- Sell and Buy Trading Signals - Index ATR Indicator Analysis

Technical Analysis in Indices Trading

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