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ATR vs standard deviation: two rulers for how much price moves

Both tell you how "wild" a market is. But ATR counts how big each candle is, and standard deviation counts how far closes stray from their average.

Comparison · 6-minute read · Updated 2026-10-21

The short answer

The ATR (average true range) is the average size of each candle's full move. It includes any gap from the last close. It's in price units, like "1.20 points".

Standard deviation measures how spread out the closing prices are around their average. It's also in price units, but it ignores what happened inside each candle.

So ATR answers "how big are the candles?" Standard deviation answers "how far do closes wander from normal?"

Side by side

How ATR works, in plain words

For each candle, ATR takes the biggest of three distances:

• The high minus the low.
• The high minus the last close.
• The last close minus the low.

That's the "true range". The last two catch gaps. Then ATR averages the true range over 14 candles. See ATR explained.

How standard deviation works, in plain words

Take the last 20 closes. Find their average. Measure how far each close sits from it. Square those distances, average them, and take the square root.

You don't need to do this by hand. The idea is enough: if closes cluster tightly, the number is small. If they're scattered, it's big.

A worked example

Picture five candles on a quiet stock:

• Each candle has a high-low range of about 2 points.
• But every close lands near 50. They barely change.

ATR reads about 2. The candles are moving 2 points inside each bar.

Standard deviation of those closes reads close to 0. The closes aren't wandering.

Same chart, two different answers. Neither is wrong. ATR sees busy candles. Standard deviation sees steady closes. That's also why Bollinger Bands vs Keltner Channels can look so different on the same chart.

ATR: strengths and limits

The good parts:

• Made for stops. If candles move 2 points on average, a stop 0.5 points away will likely get hit by normal noise.
• Counts gaps. Overnight and weekend jumps show up.
• Steady. It changes slowly, so it's a calm read.

The limits:

• No direction. A high ATR can come from a strong rise or a strong fall.
• Slow to warn. It can lag a sudden calm-to-wild shift.

Standard deviation: strengths and limits

The good parts:

• Standard math. It's the base of many tools, including Bollinger Bands and historical volatility.
• Shows clustering. It's good at flagging quiet spells when closes bunch up.

The limits:

• Misses what happens inside candles. Long tails don't count unless the close moves.
• Jumpy. One big close can swing it a lot, then it drops back.

Which fits you?

1. Do you want help placing a stop and sizing a trade? ATR tends to fit better. Many traders check that their stop sits past a chart level and is wider than normal candle noise. See how to set a stop loss.
2. Do you want to spot quiet spells or build bands? Standard deviation tends to fit better.
3. Just starting out? ATR is easier to picture. "Candles move about this much" is a plain idea.

Once you have a stop distance, the position size calculator turns it into a size. Wider stop, smaller size, same risk.

Common mistakes

• Using ATR as the stop by itself. A stop belongs past the last place price turned around. ATR is a check, not the location. See support and resistance.
• Keeping the same size when volatility doubles. Bigger moves need a wider stop, which means a smaller size to keep risk the same.
• Comparing raw numbers across markets. An ATR of 2 means different things on a 20-dollar stock and a 500-dollar stock.
• Reading high volatility as "good" or "bad". It's just bigger moves, both ways.

Questions