However, it is now widely used by forex traders as well. Traders rarely use the indicator to discern future price movement directions but use it to gain a perception of what recent historical volatility is to prepare an execution plan for trading.
How do I use the average true range indicator?
When you add the Average True Range indicator to your price chart, you will be presented with the ATR indicator settings window. The only variable you need to worry about is the ‘Period’. This is the number of periods over which MT4 or MT5 will make the Average True Range calculation.
What is the ATR indicator?
The ATR indicator is common on MetaTrader4 trading software and is a standard feature on other trading platforms. The calculation formula sequence attempts to remove the impacts of gaps between market closings to establish absolute ranges for each given period, whether for a minute or a day or whatever chart time you choose.
Does the average true range indicator measure volatility?
Nope! The Average True Range indicator measures the volatility of the market. This means volatility can be low while the market is trending higher (and vice versa). Here’s an example: The S&P is trending higher while volatility is heading lower… Does it make sense? Good. Then let’s move on… The volatility of the markets is always changing.
