What does ATR (Average True Range) mean?

ATR measures a stock's average daily price range over a recent period — it's a volatility gauge, not a direction signal.

ATR measures average daily price range over N periods (usually 14). It's a volatility gauge, not a direction signal. Traders use ATR to size positions and set stop-loss distances — wider ATR means wider stops.

ATR (Average True Range) example

A stock with a 14-day ATR of $3 moves about $3 on a typical day. A stop-loss only $0.50 below your entry would likely be hit by ordinary noise; something like 1.5–2 × ATR gives it room.

Common beginner mistake

Thinking ATR tells you direction. It only measures how much a price moves, not which way.