A 1% move in EUR/USD makes for a busy day on a currency desk. In Bitcoin, the same move can come and go before lunch without anyone noticing. Percentage changes tell you how far a market moved today, but they don’t tell you if that’s normal for it. The Average True Range, or ATR, does exactly that job, showing how much a market usually moves in a session, and it explains why a stop loss that suits one market can be far too tight or far too loose in another.
Quick answer: ATR, or Average True Range, measures how much a market typically moves over a set number of periods, usually 14, including any gaps between sessions. It doesn’t show direction. Traders use it to see when volatility is rising or falling and to set stop distances that match each market’s normal range, which a fixed percentage or point distance can’t do.
Compare How Every Market Is Moving
Forex, indices, gold, crypto and more update live on one screen, so you can see which markets are calm and which are swinging hard today.
What Is Average True Range?
ATR was developed by J. Welles Wilder and published in his 1978 book New Concepts in Technical Trading Systems, originally for commodity markets. It averages the “true range” of each period, usually over 14 periods, according to its entry on Wikipedia.
The true range for each period is the largest of three numbers.
- Today’s high minus today’s low
- Today’s high minus yesterday’s close, ignoring the sign
- Today’s low minus yesterday’s close, ignoring the sign
The second and third measures capture gaps, when a market opens well away from where it closed. A simple high-minus-low range misses those completely.
A Simple True Range Example
| Day | Previous close | High | Low | High minus low | Gap-adjusted range | True range |
|---|---|---|---|---|---|---|
| 1 | 103 | 105 | 101 | 4 | 2 | 4 |
| 2 | 104 | 110 | 107 | 3 | 6 | 6 |
| 3 | 109 | 108 | 106 | 2 | 3 | 3 |
On day 2, the market gapped up from 104 and traded between 107 and 110. The day’s own range was only 3, but the true range was 6, because it measures the full distance from the previous close. Average those true ranges over 14 days and you have the ATR.
Why ATR Beats Percentage Moves Alone
- It’s specific to each market: a 1% day might be big for a major currency pair and quiet for crypto, and ATR shows what counts as normal for each one
- It includes gaps: weekend gaps in stocks, and moves after major news, are counted in the true range
- It’s in price units: ATR is shown in pips, points or dollars, which makes it easy to use directly when setting a stop
- It tracks change over time: a rising ATR tells you a market is getting more volatile, even if its percentage moves look similar to last month
How Volatility Changes Over Time
ATR isn’t fixed. It expands when markets get busy and contracts when they calm down.
- Around major data releases: ATR often jumps in the days around a CPI report or a central bank decision, as our article on the next CPI report explains
- During shocks: energy markets in 2026 have shown how quickly volatility can rise when supply is disrupted, which our article on oil prices and inflation covers in more detail
- In quiet periods: holiday weeks and slow summer sessions often see ATR fall well under its usual level
A stop that worked well in a calm month can get hit by ordinary noise once volatility picks up. Checking ATR before each trade keeps stops in line with the market as it is today.
Why the Same Stop Distance Ignores Each Market’s Range
Here’s what a fixed stop placed 1% away looks like in four markets with very different daily ranges. The ATR figures are illustrative.
| Market | Example daily ATR, as % of price | A 1% stop equals |
|---|---|---|
| Major currency pair | 0.5% | 2 days of typical movement |
| Large-cap stock index | 1.2% | Less than 1 day |
| Gold | 1.5% | About two-thirds of a day |
| Bitcoin | 3.5% | Under a third of a day |
The same 1% stop gives a currency pair plenty of room and almost none to Bitcoin, which could hit it on an ordinary move. Setting stops as a multiple of ATR fixes that, because the distance adjusts to each market automatically.
How Traders Use ATR for Stops and Position Size
ATR-Based Stops
Many traders place stops at a multiple of ATR from their entry, often somewhere between 1.5 and 3 times, depending on the timeframe and how much room they want to give the trade. A wider multiple means fewer stop-outs from noise, and a larger loss when the stop is hit.
Position Sizing
ATR can also help keep risk consistent across markets. Say a trader decides to risk $200 on a trade and uses a stop of 2 times ATR.
- If gold’s ATR is $30, the stop is $60 away, and the position would be about 3.3 ounces
- If the ATR doubles to $60, the stop moves to $120, and the position halves to about 1.7 ounces
The amount at risk stays the same, while the position adjusts to how volatile the market has become.
What ATR Doesn’t Tell You
- Direction: a high ATR can come with a rally or a sell-off
- Where to enter: it measures range, and timing has to come from somewhere else
- Sudden jumps: ATR is an average of the past and reacts after volatility has already risen
- Trading costs: spreads can widen around major news, and the Trading Conditions page sets out spreads and hours for each instrument
ATR works well alongside a trend-strength measure like ADX, covered in our article on ADX, a momentum tool like the RSI, covered in our article on RSI divergence, and an intraday benchmark like VWAP, explained in our guide to VWAP. Trading carries risk, and no indicator removes it.
Frequently Asked Questions
What is a good ATR value?
There’s no single good ATR value, because it depends on the market and its price. ATR is measured in price units, and a currency pair, a stock index and Bitcoin will all have very different readings. It’s most useful when compared with the same market’s recent history, to see if volatility is rising or falling.
How do you use ATR for a stop loss?
To use ATR for a stop loss, multiply the current ATR by a chosen factor, often between 1.5 and 3, and place the stop that distance from your entry. A trade in a market with an ATR of 50 points and a 2 times multiple would have a stop 100 points away, giving it room for normal movement.
What does a high ATR mean?
A high ATR means a market has been moving more than usual over recent sessions, with wider daily ranges or bigger gaps. It shows rising volatility, though it doesn’t say which direction prices are heading. High ATR readings often appear around major news, during sharp sell-offs and in the early stages of strong trends.
Is ATR the same as volatility?
ATR is one way of measuring volatility. It shows the average size of a market’s moves in price terms, including gaps between sessions. Other measures, like standard deviation or implied volatility from options prices, calculate it differently. ATR is popular with traders because it’s simple and can be used directly to set stop distances.
