Average True Range

Average True Range (ATR) is a volatility indicator. It is also used as part of other trading systems such as Starc Bands and Keltner Channels.

Overview

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.

Signals

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.

Further Information

Also see Keltner Channels.

Interpretation

 

The Swing Index alone doesn't provide much in the way of signals. It should be used in conjunction with the Accumulative Swing Index.

See the Accumulative Swing Index.