Average True Range Stocks Technical Analysis and ATR Stocks Signals

Developed by J. Welles Wilder

This stocks indicator is a measure of volatility - it measures the range of stocks price movement for a particular stocks price period. The ATR is a directionless indicator and it does not determine the direction of the Stocks 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 stocks price movement- Stocks 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 stocks market and during consolidation.

Calculation

This stocks indicator is calculated using the following:

• Difference between the current high and the current low

• Difference between the previous closing stocks price and the current high

• Difference between the previous closing stocks price and the current low

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

Stocks Technical Analysis and Generating Stock Signals

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

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

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

Technical Analysis in Stocks Trading