Description

• Average True Range (ATR) band was developed by J Welles Wilder Junior
• It is calculated using moving average
• Plots two bands that represent the real highs and lows of the day to include possible gaps from the prior bars close to the current bars open

Interpretation

• Volatility of stocks can be measured from the upper and lower bands
• Stocks that are highly volatile follow uptrend and possess higher ATR
• Stocks that are less volatile follow downtrend and possess lower ATR

Default Parameters Used/Inputs

• Price Line
• Avg Type
• Avg Bars
• ATR Bars
• ATR Factor

Returns/Output

ATR band of the stock

Formula

Ub[X]=MA[X]+Af*ATR(MA[X],R2)
Lb[X]=MA[X]-Af*ATR(MA[X],Tr)
Ub and Lb indicate upper and lower bands
MA[X] indicates moving average at current bar X
Af, Tr and R2 indicate ATRFactor, ATR bars and range respectively