Average True Range

Investors typically use the Average True Range in order to analyse the volatility of a given stock. A high (low) ATR indicates that a stock is more (less) volatile. The indicator can be used to generate buy or sell signals. Some traders buy a stock when the price reaches the level equivalent to the open price, plus the ATR (or a multiple of the ATR). Alternatively, some traders sell a stock when the price reaches the level equivalent to the open price, minus the ATR (or a multiple of the ATR).

Parameters

1. Period - The number of periods (eg. days) to use when calculating the moving average of the True Range.