Average True Range (ATR) is an indicator developed by J. Welles Wilder. It is design to measures volatility. ATR is calculated based on 14 days. Its formula is
Current ATR = [(Prior ATR x 13) + Current TR] / 14
- Multiply the previous 14-day ATR by 13.
- Add the most recent day's TR value.
- Divide the total by 14
Unlike MACD or RSI that give you buy or sell signal. ATR indicator is a unique way to measure the volatility of the stock. You can use ATR to measure the enthusiasm behind a move , reversal or breakout. You can use ATR show strong buying pressure or strong selling pressure and confirmr the interest or disinterest in a move of stock price.
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