Interpreting ATR

[mcginty]

Hi everyone,
Bit of a silly question probably but can anyone tell me how to read this ATR value please?
1.1807
I thought it was based on the last 3 digits i.e. 0.0123 mean an ATR of 123 pips but I'm confused by the larger number.
Cheers,
Keith

 

[timsk]

Hi Keith,
Without the context of instrument and timeframe, I can't comment on the figures you provide I'm afraid.

For a good article explaining what ATR is, read this: The Average True Range Indicator
It's primary use is to measure the volatility of an instrument which, in turn, is a useful aid to deciding on an appropriate position size. For more on this, check out this article: Position Sizing as an Approach to Risk Management
Tim.

 

[mcginty]

Hi Keith,
Without the context of instrument and timeframe, I can't comment on the figures you provide I'm afraid.

For a good article explaining what ATR is, read this: The Average True Range Indicator
It's primary use is to measure the volatility of an instrument which, in turn, is a useful aid to deciding on an appropriate position size. For more on this, check out this article: Position Sizing as an Approach to Risk Management
Tim.

Hi Tim,

Thanks for getting back to me.

It's the daily timeframe on the USD/JPY.

 

[FringFX]

Hi mcginty,

I don't use ATR myself, but 1.1807 might mean 118 pips.

The "last 3 digits" bit might refer to reading the number of pips in the currency pair itself, and not in the ATR reading. For example, USDJPY went as high as 96.54 on Friday and as low as 94.78. If you read the price using the last 3 digits, you would come up with a 177 pip difference.

I may be wrong, though, so do continue reading up on ATR.

 

[Rhody Trader]

ATR is indicated in the same price terms as the instrument it's being calculated on. Since generally you only quote USD/JPY to 2 decimal places (maybe three in the case of pippettes), you need only look at ATR out that many places as well. So, as noted above, you're talking 118 pips.

 

[mcginty]

Sorry for not responding sooner but thanks for your input gents

 

[Vicorka]

Hi everyone,
Bit of a silly question probably but can anyone tell me how to read this ATR value please?
1.1807
I thought it was based on the last 3 digits i.e. 0.0123 mean an ATR of 123 pips but I'm confused by the larger number.
Cheers,
Keith

ATR - average true range.

When you are trying to interpret the ATR readings you have to mention the bar period settings for ATR and time-frame.

As an example, ATR with 10 bar period on daily chart (1 bar = 1 day) would mean that over the past 10 trading session the analyzed security was making in average 1.1807 points (in your case) swing per day - distance between high and low or between previous close and current high and low.

Again, it is difficult to say whether 1.1807 is an indication of high or low volatility. As an example, for SIRI stock that is traded around 3.3, the ATR at 1.18 would indicate extremely high volatility. However, for the DJI index (traded around 15000) it would be extremely low volatility.

Again, the question would be why do you need ATR: to monitor volatility or use in a trading system. Depending on specifics, it could be recommended using ATR% (Average True Range in percents).

 

[Solas0077]

The problem I have is what period to use with ATR. This is too vague of an indicator.

 

[Vicorka]

The problem I have is what period to use with ATR. This is too vague of an indicator.

Personally, I use ATR(14), sometimes may use ATR(10). yet, I use it on daily charts only. I do not generate signals on it - I use it for monitoring. As an example, I will go back to the chart settings I used in the beginning of June and before when AR(14) drops below 1.2% (not points) on the S&P 500. Putting in simple words, I use different chart setting during periods of different volatility. And I use ATR% to measure volatility.

However, what fits me may not necessary be good to others. In addition, for some stocks 1% volatility is a normal condition and for some it is extreme volatility. For some stocks you may need to smooth it stronger and use bigger bar period setting. Therefore, my setting may not necessary help you.

If you have trouble with ATR bar period, check free indicators' scan at
ATR
Enter your stock symbol into the search and then follow the link to signals to see what ATR bar period setting generated the best return in the past and go from there.

 

[Solas0077]

Looks like a selection of optimized settings on hindsight.