Average True Range ATR

Average True Range ATR

An important auxiliary measure in numerous indicator approaches is the so-called true range goes dar. the term back to the well-known American analyst Welles Wilder, whose objective consisted in the variation of his favorite commodity and futures markets reflect far more than even any price gaps (Gaps ) should be considered. In principle, he wanted to confront the obvious shortcomings of previously known approaches such as the arithmetic average of the daily trading range formation, which is why he introduced some additional conditions which in addition to the normal high-low range of a particular trading period should be considered.

Specifically, he defined the true range as follows:
* In the event that the current period is higher than the closing of the previous period and the high range (current) high minus low (currently) smaller than the range (current) minus end (previous period), then finds the latter respect (classical Aufwärtsgap).
* In the event that the depth of the current period at the conclusion of the previous period and the margin is low (current) minus high (currently) smaller than the low-margin (current) minus end (previous period), then finds the latter respect (classical Abwärtsgap).
* In the event that the high-margin (current) minus low (to date) is greater than the two-gap structures shown, this will be used.


Subject of this paper is the indicator of Average True Range (ATR), these are simply a smoothed version of the true range detailed above concept. As for the type of smoothing, there are different approaches, the classical simple moving average is now the rule dar. The number of periods for the smoothing depends on the objectives of the observation and analysis of the underlying markets, periods of between five and 30 days are often encountered.

The most important finding, which can be deduced from the ATR is a measure of the volatility in the base to get title. It may be a better reflection of the market are considered to be won because the profit margin even possible price gaps as with conventional methods. High indicator values ​​indicate high volatility, low over a correspondingly sluggish market. This is accompanied by important insofar as many incipient trends in increasing profit margins, the trends are tending towards the end however, marked by diminishing margins. Insofar as can be on the Average True Range concept therefore conclusions on the trend gaining strength, but not the trend direction. A common application of this volatility indicator is the integration into trading systems in support of bands and channels based on commercial logic (for example, Keltner Channels, or Hull-range tapes).

Can provide good services, the true range concept and the use of risk-stops and trailing stops. This can give the sense that the volatility measured by ATR important information if the stop is set close to the market (low volatility) or a little further away from the current price (high volatility) must. When used with IN AN trailing stops can be prevented by the "noise of the market" items are thrown out of the market too early (trailing stops based on indicators not based on pure technology market).