Slope of Hope Blog Posts

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Wilders Average True Range (by Vittorio)

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ATR is a tool in every charting program (including SlopeCharts) that will calculate the most recent average true range of price based from the past 14 time intervals. When transitioning from calm to volatile market conditions, ATR will expand with price volatility. And conversely, it will contract during periods of price contraction.

You can go into the setting of the ATR and increase or decrease its length. I tend to visually look back twenty to 30 intervals manually, (by eye), yet set the ATR to the length 14 intervals. Consider this measure as a tool to measure a decent second target. A 14 interval ATR is specifically based on the interest in a healthy second target in anticipation of price volatility. Yet if price is contracting for more than 14 intervals and about to break out, length 14 will not reflect the most optimal second target price. That is why your eye looks to the left to recognize price potential. At some point, hopefully, you will learn that ATR is similar to training wheels when learning to ride a bike.