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What is ATR (Average True Range)?

In one line: ATR, the Average True Range, measures how far price typically moves in one candle, averaged over a set number of candles — often 14.

Trading glossary · Updated 2026-10-21

How it works

For each candle, the "true range" is the biggest of these three:

1. The candle's high minus its low.
2. The high minus the previous candle's close.
3. The previous close minus the low.

The second and third count gaps, so a jump overnight isn't ignored. ATR then averages the true range over the last 14 candles (the usual setting). On TradingView, you can add it from the Indicators menu by searching "Average True Range."

A simple example

A stock's 14-day ATR is $1.20. That means a typical day lately has covered about $1.20 from high to low.

Now say your stop loss is $0.30 from your entry. That's a quarter of a normal day's movement. Ordinary back-and-forth could hit it with nothing being wrong with your idea.

If the chart says your stop belongs $1.50 away instead, ATR tells you that's a bit more than one normal day's range — sensible room. The trade then gets smaller so the money at risk stays the same. The position size calculator does that part.

Why it matters

ATR is a ruler for volatility. It helps you see whether a stop is tight or roomy for this market right now. The same $1 stop can be huge on a calm stock and tiny on a wild one.

It also rises around big news and falls in quiet weeks, so it tells you when the market's mood has shifted.

A common mistake

Reading ATR as a buy or sell signal. A rising ATR means candles are getting bigger. It says nothing about direction. Prices can be swinging wildly up, down or both.

Questions