ATR (Average True Range)

ATR was developed by J. Welles Wilder. He introduced this concept in his book, "New Concepts in Technical Trading Systems". ATR is an indicator that measures a currency’s volatility. Wilder's definition of true range(TR) is the greatest of the these: current high less the current low; the absolute value of: current high less previous close; the absolute value of: current low less previous close. This calculation method makes sure that large gaps accompanied by small high/low ranges are not excluded when measuring volatility in currency trading.

ATR is usually based on 14 periods and can be calculated on an intra-day, daily, weekly or monthly basis. The first 14-day ATR value is a simple average of the last 14 daily ATR values. Further calculations would smooth the indicator by including the previous 14-day ATR value when calculating the current day’s ATR value.