Average True Range ATR Stock Indices Technical Analysis & ATR Stock Indices Signals

Developed by J. Welles Wilder

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

High ATR values

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

Low ATR values

Low Average True Range values showed extended periods of sideways stock index 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 market and during consolidation.

Calculation

This indices technical indicator is calculated using the following:

• Difference between the current high & the current low

• Difference between the previous closing stock index price & the current high

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

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

Indices Technical Analysis & How to Generate Trading Signals

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

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

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

Technical Analysis in Indices Trading