What Is ATR (Average True Range)? Volatility and Stop-Loss
What is ATR?
The average true range measures the average price movement of a set number of candles. It gives no direction, only how volatile the market is.
How is it calculated?
For each candle, the true range is the greatest of high−low, high−previous close and previous close−low. The average of 14 candles is typical.
Stop-loss distance
A stop placed 1.5–3 ATR away from entry is less likely to be hit by ordinary noise. The distance grows in volatile assets and shrinks in calm ones.
Position size
To risk the same amount of money, open a smaller position in a volatile asset and a larger one in a calm asset: position = accepted risk / (ATR × multiple).
Source note
Wilder introduced ATR in 1978 in 'New Concepts in Technical Trading Systems'; the default period is 14 and it measures volatility, not direction, including price gaps[1].
Things to watch
ATR measures past volatility; news and gaps can exceed it. This page is educational, not investment advice.
Frequently asked questions
- What does ATR measure?
- It measures volatility, not direction, including price gaps[1].
- What is ATR's default period?
- In ATR, introduced by Wilder in 1978 in 'New Concepts in Technical Trading Systems', the default period is 14[1].
Related guides
Sources
- Average True Range (ATR). StockCharts ChartSchool. Accessed: 2026-10-22.