What is a true range and how can we use it with the help of a chandelier indicator?

<p id="isPasted">The average true range (ATR) is a technical analysis indicator introduced by market technician J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems that measures market volatility by decomposing the entire range of an asset price for that period.</p><p>The true range indicator is taken as the greatest of the following: current high less the current low; the absolute value of the current high less the previous close; and the absolute value of the current low less the previous close. The ATR is then a moving average, generally using 14 days, of the true ranges.1</p><p>Traders can use shorter periods than 14 days to generate more trading signals, while longer periods have a higher probability to generate fewer trading signals.<span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/watch??app=desktop&amp;v=NFTeP-Ius5sautoplay=1&amp;mute=1&amp;wmode=opaque&amp;rel=0" frameborder="0" allowfullscreen="" class="fr-draggable"></iframe></span></p>

<p id="isPasted">A true range measures a single period's price movement, including gaps, by finding the greatest of three price differences: current high minus current low, current high minus previous close, and current low minus previous close. The Chandelier Exit indicator, which is based on the Average True Range (ATR), uses this true range concept to create a volatility-adjusted trailing stop loss for long and short positions, helping traders stay in a trend longer by placing exits based on market volatility.&nbsp;</p><p>What is a True Range (TR)?</p><p>A true range (TR) is a single calculation that accounts for gaps in price movement, which a simple high-low range would miss. For any given trading period, the true range is the largest of the following three values:&nbsp;</p><p>High - Low: The current period's price range.</p><p>|High - Previous Close|: The absolute difference between the current high and the previous period's close.&nbsp;</p><p>|Low - Previous Close|: The absolute difference between the current low and the previous period's close.&nbsp;</p><p>What is the Average True Range (ATR)?</p><p>The Average True Range (ATR) is a smoothed average of the true range over a specified period, typically 14 days. It measures market volatility, indicating the average price movement. A higher ATR means greater volatility and wider price swings, while a lower ATR suggests a quieter market with smaller price ranges.&nbsp;</p><p>How the Chandelier Exit Uses the ATR</p><p>The Chandelier Exit indicator is a trading tool that incorporates the ATR to help traders set trailing stop losses and ride trends.&nbsp;</p><p>Volatility-Adjusted Stops: The ATR provides a dynamic measure of market volatility, which the Chandelier Exit uses to adjust its stop-loss levels.&nbsp;</p><p>Chandelier Exit for Long Positions:</p><p>Plotting: It's plotted below the asset's price in an uptrend.&nbsp;</p><p>Calculation: It's calculated based on the highest highs over a defined period, adjusted by the ATR.&nbsp;</p><p>Exit Signal: When the price falls below the Chandelier Exit line, it signals a potential reversal, and traders should exit their long positions.&nbsp;</p><p>Chandelier Exit for Short Positions:</p><p>Plotting: It's plotted above the asset's price in a downtrend.&nbsp;</p><p>Calculation: It's calculated based on the lowest lows over a defined period, adjusted by the ATR.&nbsp;</p><p>Exit Signal: When the price rises above the Chandelier Exit line, it indicates a potential trend reversal, signaling time to exit the short position.&nbsp;</p>