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NIFTY

8389.95      -22.85 -0.27%

BANK NIFTY

19028.65      -67.80 -0.36%
ACC 1317.90 (-0.98%) Link
Symbol     LTP Chng%
JBFIND 253.00   + 12.27
BALKRISIND 1193.00   + 10.32
TTKPRESTIG 5879.95   + 4.83
POLARIS 168.30   + 4.53
SONATSOFTW 205.70   + 4.50
Symbol     LTP Chng%
DEEPAKFERT 268.45    -4.52
IL&FSTRANS 113.25    -2.87
FORTIS 186.15    -2.74
RELIANCE 1047.45    -2.68
TV18BRDCST 36.80    -2.65
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Average True Range (ATR)

Introduction

The True Range Indicator is the greatest of the following: - 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 average true range is a moving average (generally 14-days) of the true ranges".

ATR was originally developed for commodities but the indicator can also be used for stocks and indexes. Simply put, a stock experiencing a high level of volatility will have a higher ATR, and a low volatility stock will have a lower ATR.

Formula

Current ATR = [(Prior ATR x 13) + Current TR] / 14

Advantage

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. A bullish reversal with an increase in ATR would show strong buying pressure and reinforce the reversal.

Sample Calculation

Technical chart for ATR

Technical Indicators

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