ATR & ADX Indicators PPTX

INDICATORS Ing. Radovan Dráb, PhD. Ing. Viliam Vajda, PhD. ATR – AVERAGE TRUE RANGE ATR – Average True Range Creator of the RSI - Welles Wilder (1978) ATR is not a real indicator (in the meaning of indicator suitable for entering position) It is a part of the calculations o...

INDICATORS Ing. Radovan Dráb, PhD. Ing. Viliam Vajda, PhD. ATR – AVERAGE TRUE RANGE ATR – Average True Range Creator of the RSI - Welles Wilder (1978) ATR is not a real indicator (in the meaning of indicator suitable for entering position) It is a part of the calculations of some others indicators ATR shows value of the average price range When the market volatility is high the value of ATR is also high and vice versa When the value of ATR is high there is a probability of change of the trend ATR – Average True Range ATR calculation: TR – True range (the highest value from): 1. Today High – Today Low 2. Today High – Previous Close 3. Today Low – Previous Close ATR is moving average from the values (maximum) Wilder recommend to use 14 periods EMA ATR is usable for STOPP LOSS detection ATR works also at Commodity market as well as on FOREX  2. Current High – Previous ATR Method selection Close 3. Current Low – Previous Close Method 1 je pre Outside day – Current high is above previous one, and current low is below the previous Method 2 a 3 the other situations and when gaps occur - picture ATR – Average True Range ATR pros and cons Turnovers supported by strong ATR indicate a significant change. ATR is based on absolute values and not percentages, so its not possible to compare two stocks ATRs. ADX – AVERAGE DIRECTIONAL INDEX ADX – Average Directional index Creator of this indicator - Welles Wilder Oscillator The main role of this indicator is to define Trend power Indicator is a range indicator with range (0-100) Values below 20 – weak trending market Values above 40 – strong trending market Value above 60 – very rare Rising values of the indicator don´t indicate that market is strong rising!!!! (strong up-trend) Rising values – this means that the trend is going to be stronger (Bearish or Bullish). ADX – Average Directional index Indicator ADX consist from 2 other indicators 1. Positive directional indicator : +DI 2. Negative directional indicator : -DI + DI – represents the power of growing/increasing UP trend - DI – represents the power of decreasing Down trend Calculation of DI – Directional indicator + DI = +DM/TR - DI = - DM/TR DM = directional movement for period ADX – Average Directional index Usage: If the value of ADX crosses level 20 upwards – probably there is beginning of the new trend If the value of ADX crosses level 40 downwards – probably there is the end of the trend We can also use parts of the indicator: UP trend market: +DI increase and -DI decrease DOWN trend market: -DI increase and +DI decrease If the +DI increase above –DI bullish traders are dominant on the market If the – DI increase above +DI bearish traders are dominant on the market ADX – Average Directional index ADX – Average Directional index TNX 4 ATT