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ATR: measuring volatility

Indicators that matter · Intermediate · 6 min read
You will learn to
  • What ATR is
  • Use it for stops and targets
  • Use it to compare markets

Average true range

ATR is the average size of a candle's range over the last 14 candles (including gaps). It is in price units: an ATR of 400 on BTC 4H means a typical 4-hour candle spans about $400.

Uses

  • Stops: a stop closer than about 1 ATR sits inside normal noise and gets hit randomly. The tested pattern rule uses 1.2 ATR for boundary breaks and never less than 0.25 ATR beyond a pattern.
  • Sizing: when ATR doubles, the same stop logic needs a wider stop, so the position must be half the size to keep the same risk.
  • Targets: a target of 10 ATR on the 15-minute chart is wishful thinking; 1.5–3 ATR is normal.
  • Comparing markets: "a big move" means different things on BTC and DOGE; in ATR units they are comparable.
The Trade ticket warns when a stop is inside normal noise, and offers 1.5 × ATR as one of the suggested stop levels.
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Check yourself

1. ATR doubles. To keep the same $ risk with an ATR-based stop, the position should…
  1. Double
  2. Halve ✓
  3. Stay the same
The stop is twice as far, so half the size risks the same amount.
2. A stop 0.3 ATR from entry is…
  1. Safe
  2. Inside normal noise — likely to be hit randomly ✓
  3. Too wide
Most candles move more than that.

Terms in this lesson

ATR
Average true range: typical candle size over 14 candles.
Practise it on real charts. In the app, this lesson comes with real examples (reveal what happened next), a graded drill and the track test. Open the Academy in NexusCore — free →