What is ATR & how does it work?

Unlike many of today's popular indicators, the ATR is not used to indicate the direction of price. Rather, it is a metric used solely to measure volatility, especially volatility caused by price gaps or limit moves. J. Welles Wilder created the ATR and featured it in his book New Concepts in Technical Trading Systems.

What is the difference between ATR and ATRP?

ATRP measures volatility, similar to the Average True Range (ATR), but there's a difference. ATRP is scaled as a percentage, which means you can use it to compare ATR values of different securities. The ATRP is calculated by dividing the ATR by the closing price and multiplying the value by 100.

How can ATR be used to improve trading strategies?

Here’s how you can use it to enhance your trading strategies: By analyzing ATR values, traders can assess how much a stock or asset is likely to move within a given period. High ATR values indicate high volatility, while low ATR values suggest more stable conditions.