Calculation
The range of a day's trading is simply . The true range extends it to yesterday's closing price if it was outside of today's range.
The true range is the largest of the:
- Most recent period's high minus the most recent period's low
- Absolute value of the most recent period's high minus the previous close
- Absolute value of the most recent period's low minus the previous close
The idea of ranges is that they show the commitment or enthusiasm of traders. Large or increasing ranges suggest traders prepared to continue to bid up or sell down a stock through the course of the day. Decreasing range suggests waning interest.
Read more about this topic: Average True Range
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