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Glossary · Indicators

ATR (Average True Range)

A volatility indicator showing the average size of recent price movement, based on each period's true range; it ignores direction.

By Sky Trade editorial teamUpdated

The Average True Range, another of J. Welles Wilder's tools, averages the true range of the last N periods, usually 14. The result is in price units: an ATR of 0.0008 on EUR/USD M5 means the average five-minute candle has spanned about 8 pips.

ATR says nothing about direction. A rising ATR can accompany a rally or a slump; it only shows that movement is getting larger. That makes it useful for practical questions rather than forecasts:

  • Is the market quiet or busy compared with usual?
  • Is this breakout candle large relative to normal movement?
  • Is my expiry long enough for a typical move to develop?

In conventional trading ATR is also used to set stop distances and position sizes. In fixed-payout trades, where the loss is limited to the stake, its main role is matching expiry and expectations to current volatility.

ATR values aren't comparable across instruments unless you convert them to percentages, and like any average it lags sudden changes. In the Sky Trade terminal ATR sits in the oscillator group. See the ATR guide and volatility explained.

Example

ATR(14) on GBP/USD M1 reads 1.5 pips at 03:00 UTC and 4.2 pips at 13:35 UTC. The same 30-second trade faces movements nearly three times larger after a US data release.

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