Use This Indicator to Follow The Trend

Creating and Coding the Smoothed Normalized ATR Indicator

Volatility indicators are helpful in detecting trends. This article shows how to transform the ATR into a directional indicator and create a strategy out of it.

Creating the Smoothed Normalized ATR (SNATR)

The average true range (ATR) is a technical analysis indicator that measures volatility in financial markets. It was introduced by J. Welles Wilder Jr. in his 1978 book, “New Concepts in Technical Trading Systems.” The ATR calculates the average of a security’s true range over a specified period, usually 14 days. The true range is the greatest of the following:

• The current period’s high minus the current period’s low.
• The absolute value of the current period’s high minus the previous period’s close.
• The absolute value of the current period’s low minus the previous period’s close.

The ATR is the smoothed moving average of the true range calculations. By using these three values, the ATR measures the volatility of a security over a certain time period, taking into account any gaps or price movements that occur between periods. Traders can use the ATR to determine the potential size of price movements…