ATR Explained: Average True Range
A measure of volatility: the average size of the daily price range, including gaps between sessions. Another of Wilder's 1978 indicators. It says nothing about direction.
How it's calculated
True range = the largest of: today's high − low, |today's high − yesterday's close|, |today's low − yesterday's close|. ATR is the 14-session average of the true range (Wilder's smoothing).
How traders use it
Mainly to size positions and set stops: for example, placing a stop 2 ATR from the entry, or using less leverage when ATR is high. A rising ATR warns that the market is getting more nervous.
What people say
Traders value it precisely because it isn't a signal. It answers “how much could this move against me?”, which matters a lot with leverage: in this game, a ×3 position is liquidated after a move of about a third of the price.
Practise with this indicator
Open a real hidden-stock chart with only this indicator turned on and see if it helps you beat the market.
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