Average True Range
factor.formula
True Range (TR) =
True Range is defined as the maximum value of the difference between the highest and lowest prices of the day, the absolute value of the difference between the highest price of the day and the closing price of the previous day, and the absolute value of the difference between the lowest price of the day and the closing price of the previous day. It takes into account the situation of price gaps and can more comprehensively reflect price fluctuations.
Average True Range (ATR) =
The Average True Range (ATR) is an exponential moving average of the True Range (TR). It smooths out volatility, making it easier to analyze and apply.
Default window period:
By default, the window period (N) of the exponential moving average is 20 periods, usually 20 trading days. Investors can adjust the window period according to their trading strategies and market characteristics. A smaller window period is more sensitive to price fluctuations, while a larger window period is smoother.
In the formula, the meanings of various symbols are as follows:
- :
Highest price of the day
- :
Lowest price of the day
- :
Previous day's closing price
- :
Maximization function
- :
Absolute value function
- :
True Range
- :
Exponential Moving Average Function
- :
The window period of the exponential moving average is usually 20
- :
Average True Range
factor.explanation
Average True Range (ATR) is an important indicator to measure the volatility of market prices. It reflects the degree of price volatility by calculating the average value of the True Range (TR) over a period of time, and is widely used in volatility analysis, stop loss setting and risk management. The higher the ATR value, the greater the market volatility and the greater the price fluctuation range. Investors need to pay attention to risk control. Conversely, the lower the ATR value, the smaller the market volatility and the smaller the price fluctuation range. This indicator is not used to determine the direction of price trends, but to measure the price fluctuation range. In practical applications, ATR and other technical indicators can be used in combination to improve the accuracy of trading strategies. For example, ATR can help investors dynamically adjust the stop loss position to ensure that the stop loss level changes with the change of market volatility. It can also be used to measure the strength of market breakthroughs. When ATR rises, if the price breaks through an important technical support or resistance level, it indicates that the strength of the breakthrough may be higher, otherwise, the effectiveness of the breakthrough may not be high.