Average True Range — a volatility indicator that measures the average range between high and low prices over a specific number of periods. Used for stop-loss placement and position sizing, the ATR helps traders set stops that account for normal market noise. A rising ATR indicates increasing volatility, while a falling ATR suggests the market is becoming calmer.
Example
“I set my stop-loss at 2x the ATR below my entry to give the trade enough room to breathe without being stopped out by normal fluctuations.”