The average true range (ATR) is one of the most popular technical indicators used in the forex market. It measures the volatility of a currency pair over a specified period and helps traders to identify potential trends and trading opportunities. In this article, we will explore where you can find the average true range in forex and how to use it effectively.
The average true range is a technical indicator that was developed by J. Welles Wilder Jr. in 1978. It is a measure of the average price range of a currency pair over a specified period, taking into account any gaps in the price movement. The ATR is calculated by taking the highest of the following three values:
1. The difference between the current high and the current low price
2. The difference between the previous close and the current high price
3. The difference between the previous close and the current low price
The ATR is then calculated over a specified period, usually 14 days, to provide an average value of price volatility. The higher the ATR value, the more volatile the currency pair is considered to be.
So, where can you find the average true range in forex? The ATR is a standard technical indicator that is available on most forex trading platforms. It can be found in the indicators list and can be added to the price chart of any currency pair. The ATR is usually displayed as a line chart below the price chart, and the values are shown in pips or points.
To add the ATR to your price chart, follow these simple steps:
1. Open your forex trading platform and select the currency pair you want to trade.
2. Go to the indicators list and select the Average True Range (ATR) indicator.
3. Set the period to 14 days or the desired time frame.
4. The ATR will appear as a line chart below the price chart.
Once you have added the ATR to your price chart, you can use it to identify potential trading opportunities. The ATR can be used in a number of ways, including:
1. Identifying potential trend reversals: When the ATR value is high, it indicates that the currency pair is experiencing high volatility. This can be a sign that a trend is about to reverse or that a new trend is about to form. Traders can use the ATR to identify potential trend reversals and adjust their trading strategies accordingly.
2. Setting stop-loss orders: The ATR can be used to set stop-loss orders by calculating the average range of price movements over a specified period. Traders can use the ATR to set their stop-loss orders at a distance that is proportional to the ATR value, ensuring that their trades are protected from sudden price movements.
3. Identifying potential trading opportunities: The ATR can be used to identify potential trading opportunities by identifying currency pairs that are experiencing high volatility. Traders can use the ATR to identify currency pairs that are likely to move significantly in price and adjust their trading strategies accordingly.
In conclusion, the average true range is a powerful technical indicator that can help traders to identify potential trading opportunities and manage their risk effectively. It is available on most forex trading platforms and can be used in a number of ways to improve your trading performance. By understanding how to use the ATR effectively, you can become a more successful forex trader and achieve your trading goals.
