Average True Value—Knowing the Basics
Commodities are frequently more volatile than stocks . They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. As shown in the below chart, @SuburbanDrone has chosen Average True Range (ATR) to represent WTI Crude Oil's volatility. In this article, we will cover the basics of ATR . (or Realized Volatility used in commodities market). Chart 1. WTI Crude Price shown with Realized Volatility (or ATR ; Source: @SuburbanDrone ) Average True Range (ATR) Average True Range (ATR) is an indicator that measures volatility . It was developed by J. Welles Wilder who designed ATR with commodities and daily prices in mind . [1] A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created Average True Range to capture this “missing” volatility. ATR Values Are Not Comparable ATR is based on the True Range, which uses ...