Courses / Volatility and Volume Indicators

Average True Range (ATR)

The standard way to measure volatility and set stops.

ATR averages the true range, which is the largest of high minus low, high minus previous close, or previous close minus low, over N periods (usually 14). It shows the typical movement per candle.

A stop placed 1.5 to 2 times ATR from entry gives price room to breathe. Position size is then risk divided by that stop distance.

ATR does not give direction. It adapts stops and targets to current conditions.

Key takeaways

• ATR = average of the true range, usually 14 periods
• Stops of 1.5 to 2 ATR are common
• ATR gives size, not direction

Quiz

• ATR measures: Answer: Volatility. It shows typical movement.
• A stop at 2 ATR is meant to: Answer: Give room for normal movement. It adapts to volatility.
• ATR tells you: Answer: How far it typically moves. The typical range.

Educational content, not financial advice.