# Average True Range

## Description

Average True Range is a volatility based indicator which describes the range of bars averaged for some period of time. Most common smoothing period is 14. ATR does not show any trend moving or reversing, it only measures volatility and it structure.

![](https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-69dfa96fe83cbd70a63090fa99eacfb5aca17b83%2Fscreenshot_3%20\(2\).png?alt=media)

## Formula

<div align="left"><img src="https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-8a1ba600cdc4b683df919faa4190efa9c1ef1408%2Fimage%20(45).png?alt=media" alt=""></div>

<div align="left"><img src="https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-fe207a2d19c0dda1e0a1e2a75a2c5003f3781f06%2Fimage%20(7)%20(1).png?alt=media" alt=""></div>

The first ATR value is calculated using the arithmetic mean formula:

<div align="left"><img src="https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-48955aaccf93a07b14feeeb78e100b758637e3e8%2Fimage%20(40).png?alt=media" alt=""></div>

## Most useful cases

* **Divergence/Convergence** - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high of ATR. This is a very good approach to find a weakness of existing trend

![](https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-244abbe4215b0dea6cc23ea2d15cd488bc536711%2Fimage%20\(31\)%20\(1\).png?alt=media)

* **Confirmation of existing tendency -** if price and ATR rise together it can be interpreted as a confirmation of a strength of the trend

![](https://1574671354-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FQAglKSOJnxCrGxFyuplO%2Fuploads%2Fgit-blob-0a52cceed9e0feb9ed127995cae1448e067a86a6%2Fimage%20\(37\).png?alt=media)
