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What is ATR? Average True Range in plain English

By SendPay Business · · 2 min read

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The Average True Range (ATR) is a chart indicator, introduced by J. Welles Wilder in 1978, that measures how much a price typically moves in one period. It says nothing about direction, only about the size of the moves.

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Average True Range

The first ATR is the plain average of the first 14 true ranges (14 is the usual setting). After that Wilder smoothed it: new ATR = (previous ATR × 13 + today's true range) ÷ 14. The result is in price units, such as pips or dollars, not a percentage.

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How people use it

Because ATR shows a market's normal daily swing, some people set stop-loss distances as a multiple of it, such as 1.5 or 2 times ATR, so normal noise is less likely to trigger them. Others use a rising ATR as a sign that volatility is picking up.

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The limits

ATR describes past moves and doesn't predict the next one or its direction. Its value depends on the price level, so compare ATR across markets as a share of price rather than as a raw number.

Where SendPay fits

SendPay doesn't offer trading. SendPay platforms let your customers hold GBP, EUR and USD and exchange between them at a fee you set, alongside transfers and branded Visa cards, powered by licensed partners.

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Questions people ask

How do I work out ATR?

Paste high, low and close prices into the free calculator.

ATR calculator →
What is volatility?

How much and how quickly a price moves.

Volatility →
What is a stop-loss order?

An order to sell if the price falls to a set level.

Stop-loss orders →

Read next

Spotted a mistake or something out of date? and we'll fix it. How our guides are made

This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.