What Is True Range Indicator (Trading Strategy)

True range indicator (TR) tells you the trading range of the share price.

TR consist of two main components:

  • TR Line.
  • Value bar on the right side.

Setting

True range indicator
  • Result: this is the color of this indicator.

True Range indicator calculation

Tr indicator is calculated by 3 prices

  1. previous period closing price.
  2. the high price of the current period.
  3. the low price of the current period.
  • the calculation is high – the low value of the current period.
  • also, Previous period closing price – and current period low price.
  • and, current period high – previous period closing price.
  • then total all three values.
  • and divide the value by 2. so you will get the true range value.
formula is = {(CP high - CP low)+ (PP Closing -CP Low )+ (CP High - PP Close)}/2
Where, the CP = Current period.
PP= Previous Period.

What True range value tells you,

TR used to tell you to the trading range of the share price. It calculates the gap between the previous closing and today’s high lows. and show you, the trading range of the share price.

this indicator will not help to give you buy or sell signal. also, it will not show you the direction of the trend.

True Range indicator strategy

This will help you when the indicator line is rising, these 4 things can happen.

  1. the share price trading range is increasing.
  2. or the share price gap is more between the previous closing to today’s low.
  3. or the high lows distance is much more.
  4. or all the values difference is much. that why the indicator is rising.

When suddenly the price is rising or falling too much then this indicator line will rise.

Conclusion

The true range indicator line will rise up when the trading range increasing or decreasing. It will not tell you the trend direction or any signals.

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