SkyTrade
Sign up
FeaturesPlatformSecuritySign in
Glossary · Chart and price

True range

The largest of high−low, high−previous close and low−previous close, capturing a period's full movement including gaps.

By Sky Trade editorial teamUpdated

True range (TR), introduced by J. Welles Wilder, improves on the simple high-minus-low range of a candle. It takes the greatest of:

  • current high − current low;
  • the absolute value of current high − previous close;
  • the absolute value of current low − previous close.

The two extra comparisons matter when price jumps between candles. If a candle opens well above the previous close, its own high-low range may be small even though price actually travelled much further. True range counts that jump.

On its own TR is a noisy single-candle number. Its main use is as the building block of the Average True Range, which smooths it over a number of periods, typically 14. ATR in turn feeds many other tools: stop distances in conventional trading, volatility filters, and indicators such as SuperTrend and Keltner Channels.

On continuous forex charts the three values often coincide, because each candle opens where the last one closed. The difference shows up after weekends, sudden news jumps or on instruments with gaps. See the ATR guide and the general entry on gaps.

Example

The previous close is 1.2650. The new candle's high is 1.2690 and its low 1.2670. High − low is 20 pips, but high − previous close is 40 pips, so the true range is 40 pips.

Learn more in the academy

Related terms

Practise first, then decide

Every Sky Trade account comes with a $10,000 demo balance on the same prices and payouts as the real account. Create an account or read how the demo works.

Create an accountAbout the demo account