Average True Range (ATR) indicator
You will find a lot of Forex indicators, but one of the effective technical analysis indicators is ATR. It is designed to determine the volatility of the market. Average True Range indicator shows the volatility of the market, based on the values of candles. The number of which we think it necessary to interpret. In other words, it shows the average statistical parameter of the movement of the instrument per unit time.
The real trader continually analyses his trades. Calculates various indicators before opens order. Does it on time then the order is opened and even after the close. Also, analyse order information no matter was it profitable, or unprofitable.
ATR indicator founds in any trading platform. We will turn to practical aspects, and consider an example of the application of ATR, useful for beginners and middle-level traders.
Let’s say you are driving a car. ATR is the consumption of fuel. The consumption of fuel depends on the type of engine (this is your financial instrument), time frame (time spent on the road), and driving habits. If you go fast – it is consumed quickly, at low speeds – slowly.
Statistics show that the instrument passes 2 x ATR’s only 15% of the time. That means that for 250 sessions yearly, ATR with double traffic will be 40 times for the entire period, just. Each trader can count this on any instrument. The error can be not more than 5%.
Proceeding from this, when the instrument passes 75% of the day ATR, a recommendation to open deals in the opposite direction, initiating a counter trend movement. It is worth doing it when you understand who generates the movement forces, only.
To correctly use the Average True Range indicator for any instrument, you must:
1. Analyze the movement
2. Calculate the ATR
3. Work only near the “key points.”
4. Rely on mathematics