ATR

Average True Range — volatility, used for stops/targets.

Average True Range (ATR), introduced by Wilder in 1978, measures volatility by averaging the 'true range' over a window (default 14). True range is the largest of: today's high − today's low; |today's high − previous close|; |today's low − previous close|. The previous-close legs handle overnight gaps.

ATR has the unit of price, not percent, so it scales naturally to whatever instrument you trade. It is the standard input to volatility-based stops: a 'chandelier exit' at 3 × ATR below the swing high adapts the stop distance to current market conditions instead of using a fixed-tick or fixed-percent stop.

Wilder's smoothing is a recursive EMA with α = 1/N, not the standard α = 2/(N+1). Some implementations use a simple moving average of TR instead — values can differ by a few percent.

TR_t = max(H_t − L_t, |H_t − C_{t-1}|, |L_t − C_{t-1}|)
ATR_t = ((N − 1) · ATR_{t-1} + TR_t) / N

Read the full Average true range (ATR) definition in the glossary →