Developed by J. Welles Wilder Jr., ATR stands for average true range, and is a volatility indicator.
True range is the largest of these three prices:
The absolute difference of Today’s High – Today’s Low
The absolute difference of Today’s High – Yesterday’s Close
The absolute difference of Yesterday’s Close – Today’s Low
Average true range is when you take an average of the TR values over a certain period. Wilder was inclined to use a 14 period average, but his method for averaging is somewhat different from normal averaging methods.
To arrive at the first ATR value in a series, Wilder calculated the TR values for the previous 14 days. The first TR value is simply that day's high minus that day's low. Once the initial ATR is found, subsequent ATR values are calculated using:
This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.
Trading FX and/or CFDs on margin is high risk and not suitable for everyone. Losses can exceed investment.