ATR Indices Technical Analysis and ATR Indices Trading Signals

Developed by J. Welles Wilder

This stock indices indicator is a measure of volatility - it measures the range of stock indices price movement for a particular stock indices 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 values indicated market bottoms after a selloff.

Low ATR values

Low Average True Range values showed extended periods of sideways stock indices price movement- Indices 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 stock indices trading market and during consolidation.

Calculation

This stock indices indicator is calculated using the following:

• Difference between the current high and the current low

• Difference between the previous closing stock indices price and the current high

• Difference between the previous closing stock indices price and the current low

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

Indices Technical Analysis and Generating Indices Trading Signals

Average True Range can be interpreted using the same principles as other volatility indicators.

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

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

Technical Analysis