Average True Range

The Average True Range (ATR) is an indicator of volatility, developed by John Welles Wilder. It therefore measures the volatility of prices, that is their fluctuations with the aim of signaling a possible reversal of the current trend based on the supposition that in the presence of a trend reversal the volatility takes on extreme values, positive or negative.
The Average True Range is calculated by applying a “Moving Average” on the “True Range” indicator, over a period that Welles Wilder recommends equal to 14. Welles Wilder recommends 14 because it is half of 28, or a lunar cycle, which Welles Wilder regards as the prevailing cycle in the market for the short term.