GlossaryIntermediate
True Range
A single period's full trading range, including any gap from the prior period's close.
True Range measures a single period's actual trading range, defined as the greatest of: the current high minus the current low, the current high minus the prior close, or the current low minus the prior close. Using the prior close (not just the current high/low) captures any gap between periods that a simple high-minus-low calculation would miss.
True Range is the foundational building block behind Average True Range (ATR) and feeds into several other indicators, including ADX, which derives its directional-movement calculations from the same underlying true-range data.
Examples
- If an asset gaps up overnight, its true range for that period includes the gap, even though the day's own high-to-low range might be small.
- ATR is simply a smoothed average of True Range over a chosen period.