To read Average True Range (ATR) values, you need to understand what the numbers represent.
ATR values are expressed in the same units as the price of the asset being analyzed. For example, if you are analyzing the price of a stock that is priced in dollars, the ATR values will also be in dollars.
Higher ATR values indicate higher volatility and greater potential for price movement. For example, an ATR value of $2 for a stock might suggest that the stock is moving an average of $2 per day over the specified time period.
Traders can use ATR values to set stop-loss orders and take-profit levels based on the level of risk they are willing to accept. For example, if the ATR value for a stock is $2, a trader might set a stop-loss order $2 below their entry price to limit potential losses.
In addition, traders can use ATR values to compare the volatility of different assets or time periods. For example, a trader might compare the ATR values of two different stocks to determine which one is more volatile and potentially more profitable to trade.
Overall, ATR values provide important information about market volatility and can help traders make informed decisions about risk management and trade entry and exit points.