Indicators
ATR (Average True Range)
3 min
The ATR (Average True Range) measures how much a market moves, on average, per period. It is a pure volatility gauge — it says nothing about direction.
What "true range" means
True range is the largest of: the current high-to-low, the high-to-previous-close, and the low-to-previous-close. Taking the previous close into account captures gaps that a simple high-low would miss. ATR is just the average of that over N periods (often 14).
How to read it
- A high or rising ATR means large daily swings — a volatile, fast market.
- A low or falling ATR means a quiet, compressed market.
- ATR is in the instrument's own price units, so a high-priced stock naturally shows a larger ATR than a cheap one — compare ATR to its own history, not across markets.
Why it is so useful
ATR shines for risk management, not entries. Its best uses are sizing stops and targets to current volatility — for example, placing a stop a multiple of ATR away so it is wide enough to survive normal noise, or sizing positions smaller when ATR is high. It will never tell you which way the market is going; that is the job of trend and momentum tools.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.