The Average True Range / ATR Indicator was developed by Welles Wilder and features in his 1978 book, “New Concepts in Technical Trading Systems.” It is important to remember that the indicator does not try and predict the direction of price, instead it only tries to define the current volatility in the market. To do so, Mr. Wilder started with True Range, which is the greatest of: 1) current High less the current Low, 2) current High less the previous Close (absolute value), or 3) current Low less the previous Close (absolute value). The calculation for the first few ATR values is different than the main formula, but the main formula is (where X is the look back period): ((Prior ATR * (X-1)) + Current True Range) / X.
The NinjaTrader indicator Average True Range (ATR) is built on our Oscillator Framework, which allows users to easily run the indicator on multiple time frames (MTF), including custom bar types. To preview “The Framework” that makes our indicators a necessary part of every traders arsenal, please review the following video: