Forex MT4/MT5 Indicators Forex Indicators Download Free The ATR Bands Indicator, also known as Average True Range Bands, is used to measure market volatility and identify potential price reversals. It combines elements of the Average True Range (ATR) indicator with Bollinger Bands to create Supertrend Strategya visual representation of price volatility.
What is Average True Range (ATR)?
Average True Range (ATR) is a widely-used indicator developed by J. Welles Wilder. It quantifies market volatility by calculating the average range between high and low prices over a specified period.
It quantifies market volatility by measuring the average price range between the high and low prices over a specified period. A higher ATR value indicates higher volatility, while a lower value signifies lower volatility.
Bollinger Bands
Bollinger Bands are a volatility-based indicator created by John Bollinger. The middle band, which is typically a Simple Moving Average (SMA) of the price over a specified period. The upper band, calculated by adding a certain multiple of the ATR to the middle band. The lower band, calculated by subtracting the same multiple of the ATR from the middle band.
How ATR Bands Indicator Works:
The ATR Bands Indicator integrates the ATR values into the Bollinger Bands framework to create dynamic volatility-based bands around the price chart.
When market volatility increases (as indicated by a higher ATR), the ATR Bands widen. This results in the upper and lower bands moving farther away BBands Stop V2 from the middle band. Conversely, in periods of decreased volatility (lower ATR), the ATR Bands contract, causing the upper and lower bands to move closer to the middle band.
ATR Bands Indicator Calculation, Settings
- ATR is calculated by finding the highest of three values:
- The difference between the current high and low.
- The absolute value of the current high minus the previous close.
- The absolute value of the current low minus the previous close.
Adjusting ATR Bands Settings
ATR Bands consist of three primary components:
- A middle line (typically an Exponential Moving Average) representing the mean or central trend.
- An upper band, calculated by adding a multiple of ATR to the middle line.
- A lower band, calculated by subtracting a multiple of ATR from the middle line.
Best Atr bands indicator Strategy
Traders and analysts use the ATR Bands Indicator for several purposes:
ATR Bands provide a visual representation of market volatility. Widening bands suggest increased price fluctuations, while contracting bands indicate reduced volatility. When prices trade outside the ATR Bands, it can signal the presence of a strong trend.
Prices above the upper band may indicate an uptrend, while prices below the lower band may suggest a downtrend. Contractions of the ATR Bands after a period of expansion can signal potential reversals.
Buy Sell Signal ATR Band Indicator
Traders look for these contractions as an early indication that a trend might be losing momentum.
Similar to Bollinger Bands, ATR Bands can act as dynamic support and resistance levels. When prices approach and bounce off the upper or lower bands, it may signify support or resistance, respectively.
