Indicators · Intermediate

Average True Range For Measuring Volatility

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Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

Short answer

Average True Range (ATR) measures how much a market typically moves over a given period, expressed as a single number rather than a direction — it tells you how much price is moving, not which way. ATR is calculated from the true range of each period (accounting for gaps as well as the high-low range) averaged over a chosen number of periods.

Average True Range (ATR) measures how much a market typically moves over a given period, expressed as a single number rather than a direction — it tells you how much price is moving, not which way.

What ATR Is Used For

ATR is calculated from the true range of each period (accounting for gaps as well as the high-low range) averaged over a chosen number of periods. A rising ATR indicates expanding volatility; a falling ATR indicates contracting volatility. Traders commonly use ATR to size stop losses relative to current conditions — a stop that is reasonable in a low-volatility period may be far too tight once volatility expands.

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Setting a stop loss as a multiple of ATR (for example, 1.5x ATR from entry) adapts automatically to changing conditions rather than using a fixed number of pips or points regardless of volatility
ATR can also help size positions — a wider ATR generally implies a wider stop is needed, which in turn calls for a smaller position size to keep dollar risk consistent
ATR does not indicate trend direction and should not be interpreted as a buy or sell signal by itself

Because ATR is based on historical data, a sudden volatility shock can occur faster than ATR adjusts to reflect it. Building in some buffer beyond a strict ATR-based calculation is a reasonable precaution, especially around major news events.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

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