The Average True Range indicator (ATR) is a tool used in technical analysis to measure market volatility. It was created by J. Welles Wilder Jr. and introduced in his 1978 book, New Concepts in Technical Trading Systems.
The ATR is a simple indicator that measures the range of an asset’s price action over a given period of time. The indicator does not provide any indication of price direction, simply the degree of price movement. The ATR is therefore sometimes referred to as a volatility indicator.
The ATR is calculated as the average of the asset’s true range over a given period of time. The true range is the greatest of the following:
– the current high less the current low
– the absolute value of the current high less the previous close
– the absolute value of the current low less the previous close
The ATR can be used in a number of ways, but is most commonly used as a trailing stop loss. When the price of an asset moves below the ATR, it is typically an indication that the asset is oversold and a reversal may be imminent. Conversely, when the price of an asset moves above the ATR, it is typically an indication that the asset is overbought and a reversal may be imminent.
The ATR can also be used to set profit targets. For example, if the ATR for an asset is 2, a trader may set a profit target of 4 (twice the ATR) for long positions, and a profit target of 0.5 (half the ATR) for short positions.
The ATR is a versatile indicator that can be used in a number of ways to make better informed trading decisions. So, if you’re looking to take your trading to the next level, be sure to give the ATR a try.
Other related questions:
Q: How do you use the ATR indicator in crypto trading?
A: The ATR indicator can be used in crypto trading to measure the volatility of a given market or security. It can help traders to identify potential trading opportunities, and to set appropriate stop-loss and take-profit levels.
Q: How do you use ATR for stop loss crypto?
A: There is no definitive answer to this question as different traders will have different methods for using ATR to calculate stop loss levels. Some traders may use a multiple of ATR, while others may use a specific ATR level as their stop loss. Ultimately, it is up to the individual trader to determine what method works best for them.
Q: What is ATR in crypto?
A: ATR is an abbreviation for Average True Range. ATR is a technical indicator that measures the volatility of a security.