average true range


ATR. A technical indicator that attempts to show the volatility of a given security. To calculate the average true range, you first calculate the true range by subtracting the day's low value from the day's high value, but substituting in the previous day's close value if it was higher than the day's high or lower than the day's low. Then, the exponential moving average of the true range is calculated, typically over a 14 day period. The resulting value is said to be the average true value; a higher range indicates volume for the security will increase, while a lower range suggests that volume for the security will decrease.

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