| The Average True Range (ATR) is a technical indicator employed in stock trading to measure market volatility. Calculated as the moving average of the True Range - the greatest of the current high minus the low, the absolute value of the current high minus the previous close, and the absolute value of the current low minus the previous close - the ATR provides insight into the extent of price fluctuations. Traders commonly use the ATR for setting stop-loss levels and determining position sizes. Higher ATR values indicate increased volatility, prompting some traders to favor stocks with larger ATR for potentially more significant price movements. Additionally, ATR can assist in identifying trend strength, confirming breakouts, and adjusting risk parameters based on prevailing market conditions. |
Average True Range (ATR) - Technical Analysis from A to Z