Jump to content
  • 0

Average True Range – which days are used?


REKandler

Question

Which days are used to calculate today's average true range (ATR)?

For instance, if it's a 14-day average, then does today's ATR cover the 14 days ending with (and including) today, or does it mean the 14 days ending yesterday?

Logic suggests to me that today's ATR figure should cover the 14 days ending yesterday, as there is no meaningful data on the difference between today's high and today's low until today is over.

Or have I misunderstood?

Many thanks

Richard

Link to comment

1 answer to this question

Recommended Posts

  • 0
19 hours ago, REKandler said:

Which days are used to calculate today's average true range (ATR)?

For instance, if it's a 14-day average, then does today's ATR cover the 14 days ending with (and including) today, or does it mean the 14 days ending yesterday?

Logic suggests to me that today's ATR figure should cover the 14 days ending yesterday, as there is no meaningful data on the difference between today's high and today's low until today is over.

Or have I misunderstood?

Many thanks

Richard

Hi @REKandler

How to calculate the average true range

To calculate the average true range, you would first need to calculate the true range. You would do this by taking the largest of these three calculations:

  • The current high minus the previous close
  • The current low minus the previous close
  • The current high minus the current low

You would repeat this throughout a specific time frame to achieve a moving average of a series of true ranges. A 14-period moving average is recommended as a basis from which to work out the average true range, usually over a 10- to 14-day period. For shorter time frames – hours for example – it’s recommended to use between two to 10 periods; for longer time frames – weeks or months – 20 to 50 periods are recommended.

For the table below, the figures have been used to calculate a 14-day ATR over a 10-day period. The true range for each day was calculated as described in the bullet points above.

The first true range value – taken for 1 August – is simply the current high minus the current low because the previous close cannot be used, and the first average true range – taken for 14 August – is an average of the 14 previous true ranges. After that, to achieve each subsequent average true range you would multiply the previous 14-day ATR by 13, add the most recent day’s true range and then divide the result by 14.

  High Low Close True range Average true range
1 August 46.78 46.34 46.43 0.44  
2 August 47.32 46.64 46.87 0.89  
3 August 47.45 46.43 46.76 1.02  
4 August 47.20 46.83 46.92 0.44  
5 August 47.86 47.20 47.23 0.94  
6 August 47.90 47.27 47.49 0.67  
7 August 48.23 47.34 47.34 0.89  
8 August 47.90 47.23 47.43 0.67  
9 August 47.56 46.34 46.83 1.22  
10 August 47.45 46.34 46.47 1.11  
11 August 47.67 46.43 46.56 1.24  
12 August 47.69 46.83 47.32 1.13  
13 August 48.67 47.20 47.53 1.47  
14 August 47.99 47.47 47.78 0.52 0.90
15 August 48.32 47.47 47.63 0.85 0.90
16 August 47.97 47.41 47.56 0.56 0.88
17 August 47.98 47.21 47.33 0.77 0.87
18 August 47.89 47.46 47.64 0.56 0.85
19 August 48.34 47.55 47.87 0.79 0.84
20 August 48.32 47.87 47.98 0.45 0.81
21 August 48.39 47.56 47.84 0.83 0.82
22 August 48.11 47.25 47.37 0.86 0.82
23 August 48.02 47.67 47.79 0.65 0.81

From the ATR calculation, a trader can tell whether an asset is experiencing greater or lower volatility in a particular trading session. For this particular asset, the ATR remained below 1, and it moved within a narrow band of between 0.81 and 0.90 – meaning that it wasn’t experiencing high levels of volatility. As a result, this asset might be an attractive option for a trader who doesn’t have a large appetite for risk.

For the full article: Trading with the average true range indicator

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Commodity Market Elliott Wave Analysis for Bitcoin, Bonds, Yields, USD/ DXY, Gold, Silver, Iron Ore, Copper, Uranium, Crude Oil, Natural Gas, Corn, Wheat, Soybeans, Coffee, Cocoa. Commodity Market Elliott Wave Analysis Update: Identifying the crucial turn in the USD is paramount in our analysis. However, the challenge lies in interpreting the upward movement of the USD DXY, as it can be construed in multiple ways. To gain clarity on the DXY, I examine the 10-year Yields, which indicate further upside potential. Concurrently, TLT Bonds suggest continued downside momentum. Consequently, Gold, Silver, and base metals remain susceptible to selling pressure. Additionally, the Crude oil market exhibits an upward trajectory, aligning closely with the movement of the USD DXY. Notably, Forex pairs, particularly the AUDUSD, demonstrate a direct correlation due to the interconnectedness of commodity dollars. In summary, the market pivot necessary for trading has yet to materialize and may not occur until mid-March 24. Bitcoin: Wave iv) has concluded, and Wave v) appears poised towards 55k. Dollar: Expectations point to an increase in both the Dollar and Yields, with Bonds likely to decline. Gold and Silver: Currently experiencing a corrective rally. Crude oil: Favorable for long positions in crude, while shorting gas remains advisable. Video Chapters 00:00 Bitcoin (BTC) 03:28 US Dollar Index, DXY / TLT Bonds. US Gov Bonds 10 Yr Yields 05:51 China 15:23 Precious Metals: Spot Gold XAU /GDX ETF / US Spot Silver XAG  16:20 Base Metals: Iron Ore, Copper XCU/USD. Uranium URA ETF 19:59 Energy: Crude Oil WTIOIL / Natural Gas NG 22:22 Softs and Grains, Cocoa, Coffee, Wheat, Soybeans 25:31 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge. com  Join & Learn Elliott Wave from Experts Stay ahead of market movements and make informed decisions with our comprehensive analysis.  
    • Yeah, I think it's the mechanism behind the BGB price trend. This could go farther than one would expect. So I'll be trying to add it to my pf to help boost its healthiness in the future.
    • I don't think we can still take part in the airdrop but buying it could be the best option particularly as the market seems to be helping to create a good entry price.
×
×
  • Create New...
us