ATR Analysis and ATR Trading Signals

Developed by J. Welles Wilder

This indicator is a measure of volatility - it measures the range of price movement for a particular price period. The ATR is a directionless indicator and it does not determine the direction of the trend.

High ATR values

High Average True Range indicator values indicated market bottoms after a sell off.

Low ATR values

Low ATR values showed extended periods of sideways price movement- Price Range, such as those found at market tops and consolidation periods. Low ATR values are typical for the periods of sideways movement of long duration which happen at the top of the market and during consolidation.

Calculation

This indicator is calculated using the following:

• Difference between the current high and the current low

• Difference between previous closing price and the current high

• Difference between previous closing price and the current low

The final Average is calculated by adding these values and calculating the average.

Trading Analysis & How to Generate Signals

Average True Range indicator can be analyzed using the same principles as other volatility indicators.

Possible trend change signal - The higher the value of the indicator, the higher the probability of a trend change;

Measure of gold trend momentum - The lower the indicator’s value, the weaker the trend movement.

Technical Analysis in XAUUSD Trading