ATR Meaning and
Definition
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ATR, or Average True Range, in finance and technical analysis, is a commonly used indicator that measures the volatility and range of price movements in a financial instrument over a specified period. It provides traders and investors with insights into the potential risk and market conditions of an asset.
The ATR is calculated by calculating the average of the true ranges over a specific number of periods. The true range is the maximum value among the differences between the current high and low prices, the absolute value of the difference between the current high and the previous close, and the absolute value of the difference between the current low and the previous close. By incorporating these factors, the ATR indicator captures both intraday price volatility and overnight gaps.
The ATR value is usually expressed in points or as a percentage of the asset's price. A higher ATR indicates greater volatility, whereas a lower ATR suggests decreased volatility and potentially a consolidation phase. The ATR can assist traders in setting profit targets, determining stop-loss levels, and evaluating overall market conditions.
Traders often use the ATR in conjunction with other technical indicators to support their analysis. This indicator helps them interpret and understand the magnitude of price movements, enabling them to make informed trading decisions and manage risks effectively.
Common Misspellings for ATR
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