Interpretation Average True Range is a moving average of the True Range over "X" periods, usually 14-days. True Range is the greatest difference from the following choices:
True range is always a positive number (negative numbers from the calculation above are to be ignored).
Major tops are typically accompanied by high volatility during the blow-off phase of a market, as investors become more and more nervous and ready to take profits. Major bottoms are usually calmer, with low volatility, as the hopes for quick profits have faded.
High ATR values are often correlated with high volatility as prices bottom and there is a sell off.
Low ATR values are often correlated with low volatility as prices stabilize or move into a sideways channel prior to a possible breakout.
Also see Keltner Channels.
See the Accumulative Swing Index.