Talking Points:
• The Average True Range (ATR) is a simple indicator of a critical aspect of the market: volatility
• We can project general activity, expected changes in volatility and even direction with the ATR
• A sharp drop in GBPJPY's ATR with a wedge pattern suggests a breakout is highly likely
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There are many uses for the Average True Range (ATR) but one aspect that traders enjoy most is its ability to signal breakouts, reversals, trends and other activity shifts. A quickly declining ATR reading for GBPJPY for example is an indication that the pair is heading for a near-term breakout (or breakdown) from its tight congestion. Alternatively, the S&P 500's cyclical drop in activity may indicate conditions highly exposed to a possible trend reversals. In today's Forex Strategy Video, we discuss a few of this indicator's many uses on real world examples.
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