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Average True Range (ATR) – A Magical Tool

  
  Education
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Average True Range is an indispensable tool for designers of good trading systems. It is truly a workhorse among technical indicators. Every systems trader should be familiar with ATR and its many useful functions. It has numerous applications including use in setups, entries, stops and profit taking. It is even a valuable aid in money management. The following is a brief explanation of how ATR is calculated and a few simple examples of the many ways that ATR can be used to design profitable trading systems.How to calculate Average True Range (ATR):

  • Range: This is simply the difference between the high point and the low point of any bar.
  • True Range: This is the GREATEST of the following:
    1. The distance from today’s high to today’s low
    2. The distance from yesterday’s close to today’s high, or
    3. The distance from yesterday’s close to today’s low

True range is different from range whenever there is a gap in prices from one bar to the next. Average True Range is simply the true range averaged over a number of bars of data. To make ATR adaptive to recent changes in volatility, use a short average (2 to 10 bars). To make the ATR reflective of “normal” volatility use 20 to 50 bars or more.

Will write more with Examples …Next week !!

Technically Yours

India's new currency symbol

  
Analysis, Education, Forex
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The new symbol of the Indian rupee is seen in this handout photograph after it was approved by India’s cabinet July 15. India’s cabinet on Thursday approved the adoption of the new symbol after holding a competition that drew more than 3,000 entries, which were evaluated by a deputy governor of the central bank as well as artists and designers.

 

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