True Range

What Is the True Range (TR) Indicator?

The True Range (TR) indicator measures the daily price range plus any gap from the prior day’s closing price. This is different from the traditional price range, which takes the difference between the high and low prices.

Calculating True Range

True Range looks at three prices: the previous bar’s close, the current bar’s high, and the current bar’s low.

True Range (TR) is the greater of the following:

• High minus low

• High minus the previous close

• Previous close minus the low

By using the greater of these values the TR accounts for any price gaps that may have taken place.

This raw True Range is smoothed to give the Average True Range (ATR). J. Welles Wilder introduced the TR and ATR in New Concepts in Technical Trading Systems.