Technical analysis · Intermediate

ATR and Volatility

A 1-minute lesson from the MarketPro academy, one of 26 in technical analysis.

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

Short answer

Average True Range (ATR) measures how much an instrument typically moves per candle, averaged over a lookback window (usually 14). True range accounts for gaps by including the previous close.

What ATR is

Average True Range (ATR) measures how much an instrument typically moves per candle, averaged over a lookback window (usually 14). True range accounts for gaps by including the previous close. ATR is quoted in price units, so on EUR/USD an ATR of 0.0080 on the daily chart means roughly 80 pips of typical daily movement.

Why volatility matters more than direction

Two pairs can trend identically while one moves three times as far per day. If you use the same stop distance and position size on both, your risk is wildly inconsistent. Volatility awareness is what makes risk management transferable across instruments.

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Practical uses of ATR

Stop placement: stops set at a multiple of ATR (for example 1.5x) sit outside normal noise. A 10-pip stop on a pair that moves 100 pips a day is a coin flip, not a decision.
Target realism: a target requiring three days of average range to hit within one session is unrealistic. Systematic engines often express targets in ATR multiples for exactly this reason.
Position sizing: wider ATR means wider stop means smaller size for the same money risk.
Regime detection: expanding ATR signals rising activity, often around news; contracting ATR marks quiet consolidation that frequently precedes expansion.

Key takeaway: ATR does not predict direction at all — it tells you the size of the sea you are sailing in, so you can rig the boat appropriately.

Lesson 6 of 26 in Technical analysis

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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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