What is the ATR indicator and how does it work?
In my opinion, this is one of the most underrated indicators. With the help of ATR, we are able to determine market volatility - knowing the current volatility may indirectly help us to spot stagnation on the stock exchange. The great advantage of this indicator is its simplicity and the fact that almost every broker has this tool in their arsenal. Today's article will be really short because I really don't know what else I can tell about this tool other than how it works - so feel free to read.
Basic application:
- Determination of market volatility
- Defining consolidation
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| ATR indicator |
As I said - the indicator is very easy to interpret. The principle of operation is very simple: if the ATR line is moving low, it means stagnation and a breakout should be expected in the near future - if the line is fluctuating high, the price has probably reached its extreme.
- If the ATR line moves low it means stagnation and breakthrough should be expected
- If the ATR line travels high it means that the price most likely starts to reach its extreme
