what is the average true range (atr) indicator?

What is the average true range (atr) indicator?

INTRODUCTION TO AVERAGE TRUE RANGE (ATR): Average True Range (ATR) ek technical analysis indicator hai jo market ki volatility ko measure karta hai. Ye J. Welles Wilder Jr. ne developkiya tha aur isko 1978 mein unke kitab "New Concepts in Technical Trading Systems" mein introduce kiya gaya tha. ATR traders aur analysts dwara istemaal kiya jata hai market mein volatility ke level ko measure karne ke liye. Iska istemaal stop-loss levels set karne, position size determine karne aur potential trend reversals ko identify karne mein kafi faydemand hai. ATR ko calculate karne ke liye true ranges ki series par based hai. Ye true range current high minus current low, current high minus previous close ka absolute value, ya current low minus previous close ka absolute value mein se jis bhi value badi hoti hai, use consider karta hai. Har time period ke liye true range ko average karke specified number of periods par average true range milta hai. UNDERSTANDING AVERAGE TRUE RANGE (ATR) CALCULATION: ATR typically 14-day period par calculate kiya jata hai, lekin isko different trading styles aur strategies ke according adjust kiya ja sakta hai. Longer period smooth average true range provide karega, jabki shorter period recent price action ke liye responsive hoga. ATR ke values ko interpret karte samay ye ek absolute value ke roop mein represent hota hai, matlab ye kisi directional bias ko provide nahi karta hai. Iske bajaye ye market mein volatility ke magnitude ko indicate karta hai. Higher ATR values higher volatility ko indicate karte hai, jabki lower ATR values lower volatility ko indicate karte hai. INTERPRETING AVERAGE TRUE RANGE (ATR) VALUES: Traders ATR ka upyog stop-loss levels determine karne ke liye karte hai. Ek common approach ye hota hai ki stop-loss ko entry price se average true range ka kuch multiple (jaise 2 times) niche set kiya jata hai. Isse market ke current volatility ka dhyan rakha jata hai aur excessive losses se bachav hota hai. ATR ka upyog position size determine karne ke liye bhi kiya ja sakta hai. Traders ATR value par based apne account equity ka fixed percentage allocate kar sakte hai. Jab ATR high hota hai, indicating higher volatility, tab kam position size risk management ke liye suitable ho sakta hai. Jab ATR low hota hai, indicating lower volatility, tab bada position size justify kiya ja sakta hai. ATR primarily ek volatility indicator ke roop mein use kiya jata hai, lekin ise trend-following indicator ke roop mein bhi interpret kiya ja sakta hai. Jab ATR badh raha hota hai, tab ye suggest karta hai ki volatility badh rahi hai, jo ki often ek trend ke sath associate hota hai. Jab ATR kam ho raha hota hai, tab ye suggest karta hai ki volatility kam ho rahi hai, jo trend ki kami ko indicate kar sakta hai. AVERAGE TRUE RANGE (ATR) AS A TREND INDICATOR: Traders ATR ka upyog trend ki strength confirm karne ya potential trend reversals identify karne ke liye bhi kar sakte hai. For example, agar ATR ek uptrend ke sath badh raha hai, tab ye suggest karta hai ki trend momentum gain kar raha hai. Dusri taraf, agar ATR decline hone lag raha hai jabki price continue higher move kar rahi hai, tab ye suggest kar sakta hai ki trend ki steam khatam ho rahi hai aur reversal ho sakta hai. ATR ko alag-alag financial markets, including stocks, commodities, aur forex mein istemal kiya ja sakta hai. Isko specify timeframe se limit nahi kiya ja sakta aur iska istemal intraday, daily, weekly, ya monthly charts par kiya ja sakta hai. ATR particularly un markets mein faydemand hota hai jo high volatility ya sharp price fluctuations experience karte hai. AVERAGE TRUE RANGE (ATR) IN DIFFERENT MARKETS: Stock trading mein ATR help karta hai stocks with high volatility ko identify karne mein, jo short-term trading ya swing trading strategies ke liye opportunities present kar sakta hai. Commodities mein ATR futures contracts ke liye suitable position size determine karne mein use kiya ja sakta hai, jisme market ki volatility ko consider kiya jata hai. Forex traders ATR par depend karte hai stop-loss levels set karne aur currency pairs ke liye suitable position size determine karne ke liye. Kyunki currency markets stocks ya commodities ke comparison mein low volatility experience karte hai, isliye ATR potential price movements ke range ke bare mein useful insights provide karta ha.