ATR (Average true range) FOREX indicator

One of the most progressive technical trader J.W.wilder, developed ATR to measure futures volatility. When applied on forex, ATR can help technical trader to increase profitability of his forex trading strategy.

 

 

 

Anatomy of Average true range forex (ATR) forex indicator

 

Volatility is difference between high and low of price in a chosen time period. Wilder designed this forex indicator based on observation, that on market, periods of low volatility are followed by periods of high volatility . By comparing current volatility to the average of previous candles (10 day candles by default) we can effectively enter the market at breakouts.

 

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ATR is based on exponential moving average (14) applied on true range. As such it gives fewer and more accurate signals.

 

ATR  calculation:

 

  • TrueRange = Current High – Current Low

  • TrueRange = Current High – Previous candle close

  • TruRange = Previous candle close – Current low

 

Using Average true range forex (ATR) forex indicator

 

Calculating market volatility on candle. ATR works best on daily range (candle), however it can be also  used on lower timeframes. ATR forex indicator is very useful in anticipating and reacting to marketbreakouts. To be able to compare heightened volatility of breakout to previous data, we can apply moving averages to ATR window.

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