Overview ATR provides a measure of volatility. ATR is calculated as the moving average of true price ranges over a given period. Today's high and today's low. Today's high and yesterday's close, or Today's low and yesterday's close. Major tops are typically accompanied by high volatility during the blow-off phase of a market, as investors become more and more nervous and ready to take profits.
Major bottoms are usually calmer, with low volatility , as the hopes for quick profits have faded.
Signals High ATR values are often correlated with high volatility as prices bottom and there is a sell off. Low ATR values are often correlated with low volatility as prices stabilize or move into a sideways channel prior to a possible breakout. Further Information Also see Keltner Channels .