The Average True Range (ATR) Technical Indicator

The Average True Range technical indicator, or ATR for short, is a very useful indicator because it instantly tells you how volatile the markets are. A low ATR reading indicates that the market is relatively flat with narrow trading ranges (which is why the ATR is always low in the overnight trading session) whilst a high reading indicates a highly volatile market.

This may not sound very useful but the Average True Range indicator can be invaluable, particularly if you are a momentum trader. What you really want to be looking out for are sudden increases in the ATR from a low base. This is a strong signal that the currency is potentially breaking out from a tight range and about to make a big move one way or the other.

The ATR indicator doesn't tell you the direction of the move, only the volatility, so once you see a strong increase you should take a look at other technical indicators to see if it's a position worth trading. The best positions are those that correspond with a MACD crossover and/or an EMA crossover such as the EMA (5) crossing the EMA (20), for instance.
For additional confirmation you may also like to use Bollinger Bands, which provide another measure of volatility. A breakout from narrow Bollinger Bands in conjunction with a sharp increase in the ATR from a previously low base is an excellent signal that a currency is breaking out of a tight range.
Overall it's definitely worth at least consulting the Average True Range indicator every so often, because it will instantly provide clues as to how volatile the markets are and whether or not they are worth trading.