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Indicators · Volatility

ATR (Average True Range)

The ATR, introduced by J. Welles Wilder, measures how much an asset typically moves per bar, including gaps. It says nothing about direction; it is the reference measure of volatility for placing stops and sizing positions.

What it's for
  • Measure the typical volatility per bar, gaps included.
  • Place stops outside normal noise and size positions from the risk.
  • Detect changes of volatility regime.
Plus and Pro toolTry it in Analyze
Pane
Separate, in price units
Plan
Plus and Pro
Settings
Length
Default
14 (Wilder's smoothing)

Calculation

true range TR = max(high − low, |high − previous close|, |low − previous close|)
ATR = RMA(TR, 14)            Wilder's smoothing, α = 1/14, started from a simple average

Including the previous close makes gaps count: a stock that gaps 5% and then trades in a narrow range still has a large true range.

How to read it

Quiet market with a low ATR followed by a volatile decline where the ATR more than doubles
A quiet period gives a low, flat ATR. When the market turns volatile, the ATR more than doubles: stops and position sizes calibrated in the quiet phase are no longer adequate.
  • Stops: a stop 1.5 to 3 ATR away from the entry sits outside normal noise. Oyticker's position tools place the default stop one ATR away.
  • Position size: for a fixed risk per trade, a higher ATR means a smaller position.
  • Regimes: rising ATR during declines and falling ATR in quiet advances is typical of equities.

Limits

ATR is in price units: compare it between assets (or across a large price change) in percent of the price, ATR / close.

Charts in this guide use simulated prices generated for illustration; levels and outcomes shown are examples, not observations of a real market. Educational content only, not investment advice.

Related guides

SupertrendPlusHow the Supertrend is computed from ATR bands around the median price, how it trails and flips, and why it whipsaws in ranges.Bollinger BandsHow Bollinger Bands are calculated (SMA ± k standard deviations), how to read the squeeze, band walks and mean reversion, and common misreadings.Long positionPlusHow to plan a long trade with Oyticker's position tool: entry, stop, target, risk/reward ratio, position size from your risk per trade, and the outcome on the chart.
ATR: Average True Range for volatility, stops and position sizing | Oyticker