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Do you know how an ATR indicator works?

This post was originally posted here. The writer, Rayner Teo is a veteran community member and blogger on InvestingNote, with a username known as @Rayner and has 593 followers.

I love the ATR indicator because unlike other trading indicators that measure momentum, trend direction, overbought levels, and etc.

The ATR (average true range) indicator is none of it.

Instead, it’s something entirely different.

And if used correctly, the Average True Range is one of the most powerful indicators you’ll come across.

That’s why I’ve written this post to explain the awesomeness of the Average True Range indicator.

Here’s what you’ll learn:

• What is the Average True Range (ATR) indicator and how does it work

• How to “hunt” for EXPLOSIVE moves in the market before it occurs using the ATR indicator

• How to use the ATR indicator and set a proper stop loss so you don’t get stopped out prematurely

• How to use the ATR indicator and ride BIG trends

• Using ATR to set a profit target

• How to identify “exhaustion” moves and market reversals with the ATR indicator

ATR indicator explained — what is it and how does it work

The Average True Range is an indicator that measures volatility.

It’s developed by J. Welles Wilder and was first mentioned in his book, New Concepts in Technical Analysis Systems (in 1978).

Now you might be wondering:

“How is the ATR values calculated?”

Well, it’s done using 1 of 3 methods, depending on how the candles are formed.

Here’s how…

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