Glossary
ATR (Average True Range)
Technical Analysis
ATR is an indicator that measures average price range over a set number of periods, giving a volatility figure in price units.
True range for a bar is the largest of: high minus low, high minus previous close, and low minus previous close — so it accounts for gaps. ATR is normally a 14-period average of that value.
Its main use is sizing, not direction: stops are placed at a multiple of ATR (commonly 1.5x-2x) so they sit outside normal noise, and position size is then adjusted so that the wider stop still costs the same percentage of equity.