Although it may be simple it is a very useful tool. The Average True Range calculates a candles high minus its low, adds together the last 14 results then averages that figure by 14. The formula is as follows:
Current ATR = [(prior ATR x 13) + current ATR / 14
The example below is of the eurusd on a H4 timeframe. The ATR here reads 0.00575, which equates to an average candle range of 57.5 pips.
The reason for it being called Average 'True' Range is that it also takes into account gaps that can occur between one candles close and anothers open, such as a when the market first opens on a new trading week.
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