Article The Average True Range Indicator

T2W Bot

Staff member
1,467 68
The Average True Range (ATR) indicator is one which falls in the general category of volatility-based technical analysis tools. It is so because like Bollinger Bands, another volatility-based study, it does not focus on direction in any way, but rather how much raw movement there is in price. To understand this a little better, it is worth taking a look at how the indicator is calculated.
ATR Calculation
The ATR calculation starts with determining the True Range (TR). The TR for a given period is defined as being the largest of:

Current Period High minus Current Period Low
Current Period High minus Previous Period Close
Previous Period Close minus Current Period Low

ATR is the average of the True Range (TR) over the past n periods. This is calculated the same as any standard simple moving average. The default setting is generally 14 periods.
As can be seen by examining the determination of TR, the study is attempting to capture the amount of actual price moment which...
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TraderPattern

Well-known member
339 7
I do not find value in the article as the coincidence of its philosophies with my outlooks does not exist. As a result, the article has achieved a rating of 3/10 from my perspective.
 

TheBramble

Legendary member
8,395 1,170
TraderPattern said:
I do not find value in the article as the coincidence of its philosophies with my outlooks does not exist. As a result, the article has achieved a rating of 3/10 from my perspective.
Well, that's absolutely fascinating TP. Perhaps you'd care to consider writing an article as I'm sure I wouldn't be the only one keen to look at a critical analysis by someone who has not only more than one philosophy (neat trick in itself), but also ties this in with multiple outlooks as well?

To have so much apparent flexibility in adopting a multi-faceted philosophical approach to your own trading whilst managing to identify a zero area of agreement in a topic as standard and traditional as ATRs really takes some doing.

Please consider writing up an article on your views as it's going to interesting I'm sure.

BTW - if you found the article had no value, why did you assign it 3/10 - why not 0/10?
 

TraderPattern

Well-known member
339 7
bramble

We have freedom of speech in this country, so you can say that what I say is crap if you want, and I can say that what you say is crap. And neither of us will have our heads cut off, unlike in Arab countries.

To answer your question, I gave it 3/10 cos i was feeling generous. If I wasn't generous, I would have given it 2, 1 or even 0 out of 10. But I am a nice guy, so it got 3.

Thanks,
TP
 

TheBramble

Legendary member
8,395 1,170
You miss my point TP. I wasn't in any way suggesting what you were saying was crap.

I am interested, and I'm possibly not the only one, to understand how you can have one or more philosophies and outlooks, none of which, in any way, have any conjunction whatsoever with the possibility of ATR having any significance in trading.

That's why I was encouraging you, obviously none too clearly, to offer us an article on precisely how that position could be maintained in opposition to such a traditional and classic piece of TA. Not that I champion it or use it or support it directly. But I do acknowledge its potential implications and its basic existence.

As for freedom of speech I am afraid that is as much an illusion as are most of the other 'rights' we assume we enjoy (and never really had).

I'm sure John will be comforted by your generosity, but I do urge you to consider even perhaps just a short post on the non-existence of ATR if you feel an article, its subsequent peer review, and the potential of receiving less than excellent rating yourself would cause you emotional disequilibrium.
 

frugi

1
1,827 125
The disharmony between your signature and profile doesn't make any sense to me either. :confused:
 

TheBramble

Legendary member
8,395 1,170
TraderPattern said:
Your post does not make any sense to me, so please be quiet.
I apologise if I have embarrassed you be suggesting you supply same basis for your strident repudiation of the original article's entire central tenet. It just seemed for a moment that you might know what you were talking about.
 

Grey1

Senior member
2,186 178
The best use of ATR is in Pair trading but it often not mentioned in any literatures,

Let say you want to go LONG GOOG 100 Shares and you looking to hedge another stock such as YHOO against it.

Number of Shares in YHOO = ATR GOOG / ATR YHOO * number of shares in GOOG

You do this just before taking your the position

On Friday the correct number of sharing hedging YHOO against GOOG would have been 800 YHOO against 100 GOOG . Remember these numbers vary every day due to stock's daily volatility .


There are other uses of ATR in Multi Time frame analysis but that only applies to algorithmic program trading .. ( you can hedge multiple assets across multiple time frames using ATR )
Grey 1
 
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