Average True Range (ATR)

How far the price typically moves in one bar.

What it measures

The true range of a bar is the largest of its high-to-low range and its distance from the previous close, so gaps count. ATR is a smoothed average of the true range, in price units.

How traders read it

Traders use it to size stops and positions to the market: a stop of two ATRs is wider in a busy market and tighter in a quiet one. Rising ATR means bigger bars, not a direction.

Formula

true range = the largest of high − low, |high − previous close|, |low − previous close|
first ATR = average of the first periods true ranges
ATR = (ATR(previous bar) × (periods − 1) + true range) / periods

This is Wilder’s smoothing. Some platforms smooth with an EMA instead, which gives slightly different values.

Settings and output

Call: atr(periods)

Setting	Chart default
`periods`: Periods	14

What you get: a number.

Warm-up: with atr(14), it asks for 0 bars of history and a run-up of 28, and its first value came on bar 15 of the example data.

Chart

Average True Range (ATR) drawn by its own code on example prices

The prices are made up, hourly, and the same on every page, so the chart shows how the indicator behaves, not how a market behaved.

In an algorithm

function onIntervalClose() {
  const stopPips = Math.round((2 * atr(14)) / PIP_SIZE);
  if (OPEN_POSITIONS_COUNT === 0 && CLOSE > sma(50)) {
    openPosition("BUY", { quantity: 10000, stopLossPips: stopPips });
  }
}