The ATR (Average True Range)

[oilfxpro]

The ATR (Average True Range) indicator is not a leading indicator. It is designed to help you gauge the average size of a trading range.
Defined, it is the high minus the low for a given period of time. That period can be a day, a one hour bar, a one minute bar, or even a week. It's averaged over a period of time (i.e., 14 days) to smooth out that number.
ATR can serve as an early warning system. ATR essentially gives you an idea of how much price is fluctuating at any moment in time. When ATR bottoms out, it tends to signal the possibility of rising market action. Conversely, when it peaks, it tends to signal that price action could potentially decline.
Where the trading range is narrow, you will notice that the daily highs and lows are not all that wide. But, as price breaks out of its channel and starts trending, the difference between the highs and lows usually starts to widen. And, as the trending market starts to lose its steam, you'll see the highs and lows start to come closer together again.
The urge to over-trade is ever present in a trader’s mind. One of the greatest challenges in short-term trading, or day trading, is to overcome such a tendency. You'll notice how ATR rises and peaks at various times. Then, things slow down. And, yet again, ATR begins to rise once more. Knowing that this phenomenon occurs on a regular basis will serve as a constant reminder to you that setups that are occur during quiet times probably are not the real deal. You can apply this same knowledge to longer-term charts to give you a relative perspective on where things stand overall.