ATR's - Average True Range
What is ATR?
The Average True Range (ATR) is a technical indicator that calculates the market volatility of a specific currency pair. ATR is not a directional indicator, such as MACD or RSI. Instead, ATR is a unique volatility indicator that reflects the degree of interest or disinterest in a move. Strong moves, in either direction, are often accompanied by large ranges, or large True Ranges. This is especially true at the beginning of a move. Uninspiring moves can be accompanied by relatively narrow ranges. As such, ATR can be used to validate the enthusiasm behind a move or breakout. More here: The ATR is calculated @ 5PM ET every day.
Excerpted from the link above:
"A stock's range is the difference between the high and low price on any given day. It reveals information about how volatile a stock is. Large ranges indicate high volatility and small ranges indicate low volatility. The range is measured the same way for options and commodities (and Forex) - high minus low - as they are for stocks". Essentially, the ATR will end up being the day chart candle (including the intraday moves up and down inside the day candle).
The average true range (ATR) is an exponential moving average of the true range. Wilder (the inventor) used a 14-day ATR ... so unless you are trading a 14 day chart with the ATR indicator on it, you most likely have incorrect information.
ProAct Traders use the ATR daily - it is one of the most important pieces of information to know!
For example: it is the start of the London session and we are looking to trade the EURAUD which has a (14 day) ATR of 123 pips. The move is ahead of us so this becomes part of the criteria for entering. But, if it is at the end of the New York session and the pair has moved 102 pips already, we pass on the trade even though everything may look perfect since it will statistically only do 21 more pips and then it is over. The graphic below shows you how accurate the ATR target is day in and day out. Click to open and then ESC to close.
ProAct Traders DESKTOP ATR APP. Resides on your desktop and retrieves the ATR for the most commonly traded pairs (20). The ATR APP can float on top of your charts for easy comparisons and access to this critical information. The APP calculates the ATR in 4 different time frames ( 7, 14, 90, 180 days). The 14 day is used for intraday trading but the 90 and 180 show whether the currency is tracking on its normal average or is lower or higher than normal. By reviewing the 7 day you can see if the pair is currently averaging higher or lower then its statistical daily movement and that can be used to see if the target is within reach in the next 24 hours vs. what it statistically does. Note: we calculate the ATR's 2-3 times each week. The ATR varies a pip or 2 per broker and while it does change a pip or 2 every day in the real world it is not a significant deviation since we are using the averages.
In the screenshot of the APP below you can see that the AUDUSD has a 14 day average of 45 pips in a day, which is slightly lower than its normal 90 and 180 day average (-8-13 pips). The GBPCHF has a 14 day ATR of 83 pips but with 1/2 year of data (180 days) it is currently showing a significantly lower ATR (180 day is 105 pips). The GBPCHF is also showing that currently in the 7 day it has a 81 pips ATR compared with the 14 day of 83. That means that although we would use the 14 day ATR to find the daily target for today, we would be aware that a target that was 30 pips or so farther then the 14 day average would still have a low probability of being hit today. This would help us find a better target and manage our stops to protect our risk. You use the checkbox if you want it to be ALWAYS ON TOP of your charts. You would leave that unchecked if you only wanted to look at the ATR sporadically. It is a great feature when you have scheduled yourself to work up the charts for the day/week etc.. We have over 3 years of data for the 7-180 day periods and are now working on the weekly. We will let all traders know when the weekly has enough data to use for that projection.
“If you don’t know where you are going, any road will get you there.” —Lewis Carroll
Target Traders ALWAYS know where they are going. We never make an entry without knowing the exit. The ATR is indispensable in planning an executable trade setup to a target that has a high statistical probability of being hit within the ATR of the currency today. The ATR changes everyday @ 5PM New York Time. You have to know what time that is in your time zone. Here's an Every Time Zone Converter.
Here are some examples all taken the same day and you will see that when the currency had fulfilled its ATR they stopped dead. Wouldn't you like to know with this kind of accuracy where the currency might go TODAY? Click the graphic to open and hit the Esc key to come back.
NOTE: The ATR APP works in a PC based environment only
ATR APP 7 day demo - free to use for 7 days if you want to see if it will help you (of course it will since it is one of the most important piece of info a Forex Trader needs each day). By the way, if your average pip capture is the same as 90% of retail traders (5-8 pips) nothing will help you until you have a paradigm shift and learn to find and stay in for the intraday target. Note: it is NOT an EA for MT4 but is a separate desktop APP.
Upon purchase, we will generate the required order number and registration ID