Average True Range (ATR)
Also called: ATR
A volatility measure — the average distance price travels per period, accounting for gaps.
Definition
ATR (Wilder, 1978) is the average of the ‘true range’ over N periods. True range captures gaps (it’s the max of high-low, high-prev-close, low-prev-close) so ATR reflects real volatility, not just intraday swing.
Used for stop placement (e.g. ‘SL = entry − 2 × ATR’) and position sizing — volatile pairs get smaller positions for the same risk.
Example
EUR/USD daily ATR(14) is 60 pips. You want a stop that survives normal noise → place SL 1.5× ATR away from entry (≈90 pips).
Formula
TR = max(High−Low, |High−PrevClose|, |Low−PrevClose|) ATR = SMA(TR, n) (default n = 14)