Average True Range indicator shows the amount of the asset price movement over a period of time. In other words, it shows how the volatility of the underlying.
It helps rolling on to predict how much the price of a movement of assets in the future as it is also useful when locating the stop loss or profit target.
The ATR indicator is a kind of movement of the moving average price of an asset, usually within a period of 14 days, but can vary depending on the strategy.
ATR chart shows a line from the SMA type
Usually ATR indicator is shown on the graph line. Below the photo shows how the index ATR typically appear on the chart:
Origin can be increased or decreased volatility
When the line rises to the top, it means that the asset volatility on the rise. When it drops down, it means that the volatility is decreasing. ATR does not appear in any direction moves the original.
Tippin image below shows how the ATR high volatility and low:
Trading with the ATR
Traders ATR is used to get an idea of the amount originally expected for the price of daily movement. You can use this information to determine where can put / stop loss profit target.
For example, if the ATR shows the value of 100 points, and the direction in which monitored exceed 100 points, there is a high probability that the trend may be coming to an end.
ATR use of stop-loss
You can also use ATR to put a stop loss using the same principle. Since the ATR gives you a good indication of the movement that Sathrkha price, you can set your stop loss accordingly. By placing a stop loss away according to the scope of the daily movement of the price of an asset, you can avoid the "noise" market - that is, the movement of temporary price ups and downs during the price movement in the general direction.
If the price came to a stop loss, it means that the daily price range is growing in the opposite direction of your position and that you cut your losses as soon as possible.
The use of the value of ATR optimal way to put a stop loss, because it allows you to place a stop-loss at far away as possible and avoid the noise of the market, while using the shortest possible stop loss to do so.