AVERAGE TRUE RANGE

The Average True Range (“ATR”) is a measure of volatility. It was introduced by Welles Wilder.New Concepts in Technical Trading Systems, and has since been used as a component of many indicators and trading systems.
Interpretation
Wilder has found that high ATR values often occur at market bottoms following a “panic” sell-off. Low Average True Range values are often found during extended sideways periods, such as those found at tops and after consolidation periods.The Average True Range can be interpreted using the same techniques that are used with the other volatility indicators. Refer to the discussion on Standard Deviation for additional information on volatility interpretation.
Example
The following chart shows McDonald’s and its Average True Range.

This is a good example of high volatility as prices bottom (points “A” and “A’”) and low volatility as prices consolidate prior to a breakout (points “B” and “B’”).
Calculation
The True Range indicator is the greatest of the following:
The distance from today’s high to today’s low.
The distance from yesterday’s close to today’s high.
The distance from yesterday’s close to today’s low.
The Average True Range is a moving average (typically 14-days) of the True Ranges.
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Momentam Indicator Accumulation/Distribution

ACCUMULATION/DISTRIBUTION
The Accumulation/Distribution is a momentum indicator that associates changes in price and volume. The indicator is based on the premise that the more volume that accompanies a price move, the more significant the price move.
Interpretation
The Accumulation/Distribution is really a variation of the more popular On Balance Volume indicator. Both of these indicators attempt to confirm changes in prices by comparing the volume associated with prices.When the Accumulation/Distribution moves up, it shows that the security is being accumulated, as most of the volume is associated with upward price movement. When the indicator moves down, it shows that the security is being distributed, as most of the volume is associated with downward price movement.
Divergences between the Accumulation/Distribution and the security’s price imply a change is imminent. When a divergence does occur, prices usually change to confirm the Accumulation/Distribution. For example, if the indicator is moving up and the security’s price is going down, prices will probably reverse.
Example
The following chart shows Battle Mountain Gold and its Accumulation/Distribution.

Battle Mountain’s price diverged as it reached new highs in late July while the indicator was falling. Prices then corrected to confirm the indicator’s trend.

Calculation
A portion of each day’s volume is added or subtracted from a cumulative total. The nearer the closing price is to the high for the day, the more volume added to the cumulative total. The nearer the closing price is to the low for the day, the more volume subtracted from the cumulative total. If the close is exactly between the high and low prices, nothing is added to the cumulative total.

ACCUMULATION SWING INDEX
The Accumulation Swing Index is a cumulative total of the Swing Index. The Accumulation Swing Index was developed by Welles Wilder.
Interpretation
Mr. Wilder said, “Somewhere amidst the maze of Open, High, Low and Close prices is a phantom line that is the real market.” The Accumulation Swing Index attempts to show this phantom line. Since the Accumulation Swing Index attempts to show the “real market,” it closely resembles prices themselves. This allows you to use classic support/resistance analysis on the Index itself. Typical analysis involves looking for breakouts, new highs and lows, and divergences.
Wilder notes the followingcharacteristics of the Accumulation Swing Index:
1.It provides a numerical value that quantifies price swings.
2.It defines short-term swing points.
3.It cuts through the maze of high, low, and close prices and indicates the real   strength and direction of the market.
Example
The following chart shows Corn and its Accumulation Swing Index.

You can see that the breakouts of the price trend lines labeled “A” and “B” were confirmed by breakouts of the Accumulation Swing Index trend lines labeled “A’” and “B’.”
Calculation
The Accumulation Swing Index is a cumulative total of the Swing Index. The Swing Index and the Accumulation Swing Index require opening prices.Step-by-step instructions on calculating the Swing Index are provided in Wilder’s book, New Concepts In Technical Trading systems.
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