Glossary
ATR: meaning, example and why it matters
Average true range: a measure of how much a price typically moves in a period, including gaps. Wider ATR means a more volatile instrument, which is why ATR-based stop-losses sit further away for volatile stocks and closer for calm ones.
Worked example
If five days of true range are 4, 6, 5, 7 and 3 points, a simple 5-day ATR is (4 + 6 + 5 + 7 + 3) ÷ 5 = 5, so the instrument typically moves about 5 points a day. Wilder's smoothing gives slightly different values.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
ATR expresses typical movement in price units, which is useful when deciding how far apart to place exit levels or how large a position to hold.
Related terms
See it in practice
Frequently asked questions
Does a higher ATR mean a better stock?
No. It only means price typically moves more in a period, which also means larger swings against you.
Is this page investment advice?
No. ATR is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.