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Accumulation/Distribution Line
ADX (Wilder's DMI)
Average True Range (ATR)
Chaikin Money Flow (CMF)
Chaikin Oscillator
Commodity Channel Index (CCI)
Comparative Relative Strength
MACD
MACD Histogram
Momentum
On Balance Volume (OBV)
Price Oscillator (PPO)
Rate of Change (ROC)
Relative Strength Index (RSI)
Stochastic Oscillator
Volume
Volume Oscillator (PVO)
Williams %R

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ATR (Average True Range)

Average True Range was introduced by Welles Wilder as a measure of volatility. It was not meant to provide an indication of price direction but instead the degree of price movement (i.e. volatility).

It is the average range a stock typically covers in a specified period of time. For example if the daily ATR (14) is 2.0, then over the last 14 days, on average, the stock's daily range (price difference from high to low) was 2 points.

Another usage of ATR is with the actual number itself. If you are a swing trader who plans on holding a position for 5-7 days, and the weekly ATR is 4 points, it doesn't make sense to put a 1 point stop on the position because the normal fluctuations that typically take place during the week will likely stop you out.

Wilder found that market bottoms were signified by high ATR values after a panic sell-off occurred, and low ATR values implied sideways trading or consolidation periods that often occur at market tops.




This HOV daily chart shows how ATR is typically displayed. Notice while the stock was churing around for the first few months of the chart, the ATR was low, but when the stock started to move, its ATR also moved up signifying a much more lively and active stock.



Here is a weekly chart of JNJ. Notice how the stock become less volatile as it dropped, and that a pick up in volatility may signal and end to the down trend.



This TOL chart shows how a relatively high ATR reading can often signal a short term top (buyers are exhausted) while a low volatilty reading can signal a bottom.

 

 


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