Average True Range (ATR) is a technical indicator that measures market volatility by calculating the average range between the high and low prices over a specific number of periods, usually 14. It also considers gaps between the closing price of the previous period and the opening price of the current period. The ATR is often used to set stop-loss levels and to gauge the significance of price movements.
A higher ATR indicates higher volatility, suggesting that the asset’s price is experiencing larger swings. Conversely, a lower ATR suggests lower volatility, indicating smaller price fluctuations. Traders often use ATR in combination with other indicators to assess market conditions and manage risk.
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