By Islam BarakaDefinitions
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
Tutorials planned
These catalogued topics use this concept, but their complete build has not shipped yet.
- D07-F04-A02 Important
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