what is the average true range atr 
the average true range atr is a technical analysis indicator introduced by market technician j welles wilder jr in his book new concepts in technical trading systems that measures market volatility by decomposing the entire range of an asset price for that period the true range indicator is taken as the greatest of the following current high less the current low the absolute value of the current high less the previous close and the absolute value of the current low less the previous close the atr is then a moving average generally using 14 days of the true ranges 1traders can use shorter periods than 14 days to generate more trading signals while longer periods have a higher probability to generate fewer trading signals the average true range atr formulathe formula to calculate atr for an investment with a previous atr calculation is previous atr n 1 tr n where n number of periods tr true range begin aligned frac text previous atr n 1 text tr n textbf where n text number of periods text tr text true range end aligned nprevious atr n 1 tr where n number of periodstr true range if there is not a previous atr calculated you must use 1 n i n tr i where tr i particular true range such as first day s tr then second then third n number of periods begin aligned big frac 1 n big sum i n text tr i textbf where text tr i text particular true range such as first day s tr text then second then third n text number of periods end aligned n1 i n tri where tri particular true range such as first day s tr then second then thirdn number of periods the capital sigma symbol represents the summation of all of the terms for n periods starting at i or the period specified if there is no number following i it is assumed the starting point is the first period you may see i 1 noting to start summing at the first term you must first use the following formula to calculate the true range 1tr max h l h c p l c p where h today s high l today s low c p yesterday s closing price max highest value of the three terms so that h l today s high minus the low h c p absolute value of today s high minus yesterday s closing price l c p absolute value of today s low minus yesterday s closing price begin aligned text tr text max text h text l text h text c p text l text c p textbf where text h text today s high text l text today s low text c p text yesterday s closing price text max text highest value of the three terms textbf so that text h text l text today s high minus the low text h text c p text absolute value of today s high minus text yesterday s closing price text l text c p text absolute value of today s low minus text yesterday s closing price end aligned tr max h l h cp l cp where h today s highl today s lowcp yesterday s closing pricemax highest value of the three termsso that h l today s high minus the low h cp absolute value of today s high minusyesterday s closing price l cp absolute value of today s low minusyesterday s closing price 