Average True Range (ATR) Calculator

Find the Average True Range (ATR):

• For ANY stock, ETF, currency or index supported by Google Finance
• For ANY number of periods
• Using daily or weekly frequencies
• With 5 different periods

This Google sheets allows for the ATR to be determined for any stock or index supported by Google Finance over any number of periods on daily and weekly timeframes. Average True Range (ATR) is a technical analysis tool formulated by J. Welles Wilder in 1978 to measures volatility. ATR can be used throughout the whole trading/investing process as a measure of risk. This is what the spreadsheet looks like:

Uses:

Compare risk: Dividing ATR by the close price to find it as a percentage allows for the volatility to be compared against an index or another stock. A higher ATR percentage implies that the stock is more volatile or risky. By using ATR as a measure of volatility, we can determine the amount of risk in the price action or behaviour of the stock.

Determine risk (stop loss): ATR can be used as a trailing stop loss acting as a self-adjusting risk limit dependent on volatility. This commonly used method subtracts some predetermined multiple of ATR from the highest high price reached since buying.

Determine return (target price): ATR can be used to determine a reasonable price target within a given time frame. A method that can be used adds some predetermined multiple of ATR to the buy price.

Position size: The higher the ATR the less capital required to make the same amount of return.

Example:

A stock is bought with the expectation that within the timeframe of 4 to 12 weeks it will perform accordingly and provide the returns that we want. However, we cannot be sure that this will occur so it is absolutely critical to consider the risk involved with the ATR. This is done by subtracting the 4-week SM ATR from the buy price and setting a stop loss so that we limit our losses. A reasonable price target is determined by multiplying the 4-week SM ATR by 3 to obtain the expected volatility over the next 12 weeks. With a return to risk ratio of 3, we be sure to only buy stocks that we believe can provide these returns and sleep easy at night knowing how much capital is at risk for the expected return.

Calculation:

True Range equals the maximum of the current period high and the previous period close minus the minimum of the current period low and the previous period close.

ATR can be calculated over any number of periods on any time frame as a simple moving average (SMA), weighted moving average (WMA), exponential moving average (EMA) or running moving average (RMA).

After purchasing you will be directed to the Google spreadsheet where you can make a copy.