While so many different indicators and tools help traders to analyze the market along with the price movement and trend directions, the Average true Rate indicator will provide even deeper insights into how the asset moves.
ATR refers to the type of volatility indicators. It depicts the direction in which a trading instrument moves within a specific timeframe. Traders use it to confirm buy and sell signals. It may come in handy when detecting the best placement for the stop-loss order. As a result, the Average True Range indicator appears to be a flexible and effective tool to ensure safe and profitable day trading.
In this article, we will show you how to read the ATR indicator as well as how to download and integrate it with the MT4 platform at zero cost.
What Is the ATR Indicator?
The ATR indicator changes its direction depending on the asset price movement. In other words, when the price turns smaller or larger, the indicator moves up and down as well. So, you can observe not only the price movement but also the asset direction.
The indicator has evolved over time. Today, it offers a new way of ATR reading with calculations made every minute or when the specific period passes. The calculation timeframe will depend on the type of chart you use:
- A one-minute chart will depict ATR calculations made every minute.
- A daily chart makes calculations every day.
Despite the chart type and timeframes. All calculations form a continuous line that depicts the way volatility is changing over time. The ATR indicator is flexible enough to handle all calculations manually depending on the period you need to observe. In this case, the first thing you need to do is to calculate a number of true ranges. They include:
- The difference between the current high and previous close.
- The difference between current lows and the previous close.
- The difference between the current lows and current highs.
It does not matter if the difference is positive or negative. All you need is to detect the highest absolute value that is required to make calculations with the Average True Range indicator.