The Average True Range indicator is used to determine the volatility of the market. The idea is to replace the high-low interval for the given period, as the high-low does not take into consideration gaps and limit moves. You set the period when you create the study. The True Range is the largest of :

  • difference between the current maximum and minimum (high – low)
  • difference between the previous closing price and the current maximum
  • difference between the previous closing price and the current minimum

The Average True Range is a simple moving average of the true range values.