Back to Glossary
Average True Range (ATR)
Technical Analysis
ATR is a volatility indicator that measures, in price units, how much a stock typically moves in a period.
Each day's true range is the largest of three values: the day's high minus low, the gap between the high and the previous close, and the gap between the low and the previous close. ATR is usually the 14-day average of these values. It says nothing about direction; it is used to size stop distances or positions according to volatility.
Example
If a $100 stock has an ATR of $3, it typically moves around $3 a day. Someone placing a stop 2 ATRs below would put it at $94.
Related Terms
1 Links
More in the Guide