Definitions
In plain terms
For an n-period ATR, each update keeps (n-1)/n of the prior state before adding the new True Range weight.
Technical
The factor is 1 minus 1/n and governs the geometric persistence of seed and shock effects under uninterrupted observations.
Scope
It is a state-weight parameter, not a probability that volatility remains high.
Formula
ATR decay factor = (n - 1) / n\lambda_{ATR}=\frac{n-1}{n}| Symbol | Meaning | Unit |
|---|---|---|
n | ATR period | bars |
Output unit: ratio
Examples
- A reviewer traces ATR Decay Factor from aligned inputs through its first-ready row and edge cases before accepting a displayed value.
Common misconceptions
- It is a state-weight parameter, not a probability that volatility remains high.
Concept relationships
Prerequisites
Required by
Where this concept is used
Evidence and governance
- Average True Range TA-Lib · first party technical publication
Supports: preferred label, short definition, technical definition, formula
Limits: Seed, smoothing convention, lookback, and missing-bar handling must be declared for reproducible use.
- TA-Lib Average True Range Reference Implementation TA-Lib · first party technical publication
Supports: preferred label, short definition, technical definition, formula
Limits: TA-Lib readiness follows its own unavailable-first-TR convention and therefore differs from the local alignment.
- Reviewed by
- fintech-builder-batch-009
- Last reviewed
- 2026-07-30
- Next review
- 2027-07-30
- Record status
- published