Updated: May 9
Average True Range (ATR) is the average of true ranges over the specified period. ATR measures volatility, taking into account any gaps in the price movement. Typically, the ATR calculation is based on 14 periods, which can be intraday, daily, weekly, or monthly. To measure recent volatility, use a shorter average, such as 2 to 10 periods. For longer term volatility, use 20 to 50 periods.
ATR = (Previous ATR * (n - 1) + TR) / n
ATR = Average True Range
n = number of periods or bars TR = True Range
The True Range for today is the greatest of the following: Today's high minus today's low
The absolute value of today's high minus yesterday's close
The absolute value of today's low minus yesterday's close