What is ATR indicator?

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ATR indicator is a simple indicator but is very useful in measuring volatility. They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created ATR(Average True Range) to capture this “missing” volatility. It is important to remember that ATR does not provide an indication of price direction, just volatility. By using name metatrader indicator you will be able to unleash your trading expertise in a significant level. Surely this will add an extra ease for your successful trading.

ATR indicator for metatrader

ATR indicator is based on 14 periods and can be calculated on an intraday, daily, weekly or monthly basis. For this example, ATR indicator will be based on daily data. Because there must be a beginning, the first TR value is simply the High minus the Low, and the first 14-day ATR is the average of the daily TR values for the last 14 days. After that, Wilder sought to smooth the data by incorporating the previous period’s ATR value. ATR indicator is measured of the following 3 metrics:

The current high minus the low
The value of the current high minus the previous close
The value of the current low minus the previous close
Whichever is the highest of these three metrics is then represented as the average true range of the security. Typically, the number is then smoothed using a 14 day moving average.

In any trading, whether you trade Stocks, Future or Forex, the first key of success is having a good Strategy, which provides good result. Second most important key is Discipline and third key is Money Managing.

As a result, many traders us ATR as a method to identify and limit risk on trades. For example, if you typically hold trades open for at least a day, you will want to use a stop loss level that is at least 1 Daily ATR value away. Because of this, as the market goes through its normal breathing, the majority of the movement is likely to be contained within 1 ATR value.

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