Oscilattor: Average True Range (ATR)

The Average True Range (ATR) is an indicator of market volatility. In other words, it helps determine the average size of the daily trading range. The ATR rises as trade becomes more volatile (longer price bars) and falls during periods of low volatility (short price bars). Use the ATR to determine the best position for Stop orders.
How to interpret:
The higher the indicator value, the greater the likelihood of trend change. The lower its value, the weaker the trend is.
When the market is volatile, it is necessary to define broader stops to avoid being withdrawn from the trade by some random noise in the market. When volatility is low, you can place narrower stops. It is recommended to set stops equal to 2-4 times the ATR value. Trailing stops can be placed at a distance of 30%, 50% or more of the ATR value and, when trading in a break of some level, set your order to about 20% of the ATR to reduce the risks of a false breakup.
The indicator can be used as a trend filter, using a center line. There is no specific axis for this indicator, it must be estimated by the eye. Alternatively, you can use a moving average with broad period: when the indicator is below the moving average, the market is calm; when the ATR breaks the moving average, a trend begins.
To confirm the trend, it is worth applying the indicator at various time intervals. If the image is similar and the ATR has broken its moving average in the shortest time, the market will have sudden rallies.

EURUSDDaily atr.png


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