ATR (Average True Range)

An indicator that shows, in price units, how much a single candle usually moves. It does not say which way; it only measures the size of the swings.

Weapon tier: Advanced
Slots used: Sub-charts 1/2
Created by: J. Welles Wilder Jr. · 1978

Concept

ATR (Average True Range) is the average of how far a single candle moved up and down over the last 14 candles. A large value means the price swings hard from day to day; a small value means it moves quietly.

It grows on the way up and on the way down. So a rising ATR means “something has started to move”, not “it will rise”. The panel shows the atr line together with its long average, the atrSignal line.

atr
atrSignal

Charts by TradingView Lightweight Charts™

After the yellow vertical line, the candle size and volume grew together. In this chart the move was upward, but ATR does not tell you the direction. A large move downward with the same shape is common too. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.

How it is calculated

For each candle, find the “true range”: the largest of high − low, |high − previous close| and |low − previous close|. The previous close is included so that an overnight gap also counts as movement.

ATR = the 14-candle average of the true range. Every new candle blends into the previous average with a weight of 1/14 (Wilder’s average).

atrSignal is the simple average of atr over the last 50 candles. It is the baseline for judging whether the current swings are bigger or smaller than usual.

ATR is in price units, so the more expensive the stock, the larger the value. Do not compare the numbers of different stocks directly.

Parameters

What it sets	Name in the game	Default	Range
Candles used to average the true range	period	14	2 – 100

Trading ideas

Rising volatility: when atr, after a long time under atrSignal, rises above it, it is commonly read as “a quiet price has started to move”. The chart on this page shows that scene. Judge the direction separately from the candles and the trend (lesson 2).

Stop and target distance: traders often set the stop-loss distance as “a few times ATR”, wider when the swings are big and tighter when they are small.

Common traps

A rising ATR does not mean the price will rise. ATR often jumps the most during a sharp fall.
A cross between atr and atrSignal is not a direction signal. It only means “bigger than usual” or “smaller than usual”.
The chart on this page was chosen as a scene where the price moved up after ATR grew. It does not always go that way.

In the game

“ATR” is a “Advanced” weapon and uses 1 of the “Sub-charts” panels (limit 2). Volume in the starting setup already uses 1, so adding ATR brings it to 2 (0 left).
The panel shows the atr and atrSignal lines. The “Supertrend” weapon also uses ATR internally to place its line.

Related indicators and lessons

Bollinger Bands — An indicator that uses three lines, a moving average in the middle and a band above and below it, to show how much the price is swinging compared with usual.
Envelope — An indicator that draws lines a “fixed percentage” above and below a moving average, to show how far the price has moved away from the average.
Keltner Channels — An indicator that puts an exponential moving average in the middle and draws two lines above and below it, set apart by the usual daily range (ATR), to show the price’s “normal range”.
Donchian Channel — An indicator that traces the highest and lowest prices of a recent period, showing the moment the price leaves its “range so far”.
Standard Deviation — An indicator that shows, as a single number, how widely recent closes are scattered around their average. The larger it is, the harder the price is swinging.
Chaikin Volatility — A volatility indicator that shows, as a % change, how much the gap between each candle’s high and low has been widening (or narrowing) lately.
1. Reading a single candle
4. Volume and volume MA