Wilder ATR: True Range Smoothed Over a Configurable Period

Summary

This note describes Wilder’s Average True Range (ATR), a measure built from true range and smoothed over a configurable period. True range is the largest of three price movements: the bar’s high minus its low, the distance from the high to the previous close, or the distance from the low to the previous close. The indicator exposes the calculation period and smoothing method as adjustable settings.

The document gives the formula and defines its component price differences, but provides no worked example, performance evidence, or trading rules. ATR measures price movement rather than direction, so it can help characterize volatility but does not independently indicate whether to buy or sell. Its readings depend on the selected period and smoothing method, which should be considered when comparing values across instruments or settings.

Key ideas

• True range uses the largest of the intrabar range and the two gaps from the previous close.
• Wilder ATR smooths true range over a configurable calculation period.
• The smoothing method and period are adjustable.
• ATR describes price movement magnitude rather than market direction.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.