Average True Range Stocks 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 specific stocks price period. The ATR is a directionless indicator & it does not determine the direction of the Stocks 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 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 & the current low

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

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

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

Stocks Analysis & Generating Stock Signals

Average True Range indicator can be analyzed 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.

Analysis in Stocks Trading