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Forex Forum → Technical Indicators → Average True Range Explanation

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Posts: 4

Topic: Average True Range Explanation

The following appears in the explanation of Average True Range


100 Pips "A critical level in pips(for the appropriate logic).";

From the formulae of Average True Range, I do not understand where this 100 pips level fits into the formulae, or of its significance. Would someone care to elaborate? Thanks

Re: Average True Range Explanation

The Average True Range (ATR) is measured in pips. The True Range is the bar height including the gap (if any).

ATR is plotted on the chart as a line. This line can cross a predefined level.
The level is not a part of the indicator, but is used from FSB for calculating the buy or sell signals.

If you use the logic condition "The ATR changes its direction upward", the level is not taken into account from the program. It is significant when you use any of the conditions where the Level is mentioned.
                "The ATR is higher than the Level line",
                "The ATR is lower than the Level line",
                "The ATR crosses the Level line upward",
                "The ATR crosses the Level line downward",

The ATR values are shown as price in the chart.

http://s1.postimage.org/1uej0kn8/atr_limit.jpg


The Level line also is shown as price. It is important to know that the level in pips depends on the broker quotation. A level of 100 pips  for a 4 digit quotation is equal to a level of 1000 pips for 5 digit quotation.

The Level on the upper chart is 1000 pips (shown as 0.0100) because the digit = 5.

Re: Average True Range Explanation

Popov,
Thank you for replying:

So, from the following ATR formula:
Current ATR = [(Prior ATR x 13) + Current TR] / 14

The ATR varies, as in the illustration you provided. And, in FSB, one sets the ATR level line to a certain number,  .0100, which is set to 1000 for 5 digit quotes, (100 for 4 digit quotes) Is that correct?

Popov wrote:

The Average True Range (ATR) is measured in pips. The True Range is the bar height including the gap (if any).

ATR is plotted on the chart as a line. This line can cross a predefined level.
The level is not a part of the indicator, but is used from FSB for calculating the buy or sell signals.

If you use the logic condition "The ATR changes its direction upward", the level is not taken into account from the program. It is significant when you use any of the conditions where the Level is mentioned.
                "The ATR is higher than the Level line",
                "The ATR is lower than the Level line",
                "The ATR crosses the Level line upward",
                "The ATR crosses the Level line downward",

The ATR values are shown as price in the chart.

http://s1.postimage.org/1uej0kn8/atr_limit.jpg


The Level line also is shown as price. It is important to know that the level in pips depends on the broker quotation. A level of 100 pips  for a 4 digit quotation is equal to a level of 1000 pips for 5 digit quotation.

The Level on the upper chart is 1000 pips (shown as 0.0100) because the digit = 5.

Re: Average True Range Explanation

The ATR varies, as in the illustration you provided. And, in FSB, one sets the ATR level line to a certain number,  .0100, which is set to 1000 for 5 digit quotes, (100 for 4 digit quotes) Is that correct?

It's correct.
1 pip = 0.00001
Level 1000 = 0.00001 * 1000 = 0.0100 on the chart.

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