The Average True Range (ATR) is a technical analysis indicator that measures market volatility. Developed by J. Welles Wilder Jr., ATR calculates the average range between the high and low prices over a specified period, typically 14 days. Its main purpose is to provide traders with insights into market fluctuations, allowing them to assess the degree of price movement and adjust their trading strategies accordingly.
ATR does not indicate price direction but rather the volatility level. A higher ATR value suggests increased market volatility, while a lower value indicates reduced volatility. Traders often use ATR in conjunction with other indicators to help determine optimal entry and exit points, set stop-loss levels, and identify potential trends in various markets.