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The Average True Range (ATR ) oscillator is a volatility indicator that works especially well with falling market. The caveat with this tool is however, that it is best when the market is trending strongly. Rising volatility in a choppy market may be an indicator to a breakout due to occur.
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A High ATR value indicates that Volatility is high , and on such occurrences, a change in trend is imminent. This works especially well with falling markets. The logic behind this is of course very simple, as when market do fall, the usually fall rapidly, which is picked up by this indicator. The duration of fall at high volatility is however usually short lived, an a slowing down and reversal is what usually follows. The ATR works well as a backup indicator. |
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