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How is Average True Range calculated?
True range is the greatest of three measurements:
Once you have the True Range for each day, you can calculate the Average True Range. You select the number of days for your moving average. There are then two ways you could calculate the Average True Range:
1. The price difference between today's high and today's low
To understand this, think that when a stock gaps at the open and moves away from yesterday's close, the True Range for the day includes the gap.
2. The price difference between today's high and yesterday's close
3. The price difference between today's low and yesterday's close
Once you have the True Range for each day, you can calculate the Average True Range. You select the number of days for your moving average. There are then two ways you could calculate the Average True Range:
1. You could simply calculate a moving average of the daily True Range numbers.
2. You could use Welles WilderKeywords: