Average True Range

Average True Range

For professional forex traders, the average true range (ATR) indicator is their best indicator. Check out why it is so, and how these traders trade with it.

There usually comes a time in the journey of a forex trader when they are not only concerned with market trends, but also the volume behind those trends. Because knowing how much volume there is behind every trend helps to filter out minor trends from major trends.

This knowledge has driven many professional forex traders to turn to the average true range (ATR) value indicator. This volatility determining indicator has then become an indispensable tool for such tasks on the MT5 and other trading platforms.

The indicator we will look at is a simplified analogue of the ATR indicator, which is already installed by default in the MT5 Terminal. But it has a number of advantages, which we will tell in the article.

The Average True Range Indicator On MT5

The ATR indicator determines the volatility of the market. In other words, it portrays the average size of price movements for a given asset over a period. When you use the average true range on MT5, it displays as a line that goes up and down the indicator window. The higher the ATR value, the more volatile the market is. And the lower the ATR value, the less volume there is in the market.

The ATR indicator simply shows the current average true range value for two selected period in the left upper corner of the chart. By default, these are periods M15 and H1.

We can compare indicator values by adding the standard ATR indicator to our chart and hovering over the latest data.

As you can see in the chart above, the values of both indicators are the same, so we will simply replace the standard ATR indicator in our trading with this more compact and useful indicator. Also, you may have noticed that this ATR indicator also provides data for two timeframes at once and this can help you make informed trading decisions.

Who Is ATR Indicator Best For?
The ATR is best for forex traders of all experience levels since it doesn’t tell trends. Also, the indicator can fit into the trading systems of anyone, irrespective of their trading style.

As we can see, the indicator is no worse than the standard, but even better. Because it saves space for the workspace for objective analysis of the price chart.