Risk and psychology
True range (TR)
Definition
The largest of the three distances above for one candle. It equals the plain high-low range unless the candle moved away from the previous close.
Example
Say a stock closed at $40.00, then gapped down and traded between a high of $38.50 and a low of $37.80. The three distances are $0.70 from high to low, $1.50 from the previous close to the high and $2.20 from the previous close to the low, so the true range is $2.20. The plain high-low range would have missed more than two thirds of that move.
Hypothetical numbers, for illustration only.
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