Average True Range (ATR)

Written By
Paul Tracy
Updated November 4, 2020

What is Average True Range (ATR)?

Average true range (ATR) is a technical indicator that measures the volatility of an asset's average daily price movements.

How Does Average True Range (ATR) Work?

Average true range starts with the concept of "true range." True range (TR) is calculated by choosing the largest number from the following:

  • Current high less current low
  • Current high less previous close
  • Current low less previous close

Use the absolute value of each metric to ensure positive numbers and pick the largest. Then, average the TR from each of the most recent 14 days to calculate average true range (ATR).

Why Does Average True Range (ATR) Matter?

ATR is used to calculate the volatility of a stock, ETF, bond, commodity, etc. However, it's important to note that ATR does not indicate price direction.

As the underlying volatility of an asset increases, so does ATR. For example, during October 2008, the volatility of the S&P 500 index peaked with a daily ATR of 78. 

Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Average True Range (ATR).
Be the first to ask a question

If you have a question about Average True Range (ATR), then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Average True Range (ATR), then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Average True Range (ATR)

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms