ATR (Average True Range)
Volume Profile Analysis glossary · Auction Theory & Market Profile (TPO)
Definition
A volatility measure equal to the moving average of the True Range over a specified period (typically 14). Used for stop placement and position sizing.
ATR (Average True Range) in plain English
ATR measures how much a price typically jiggles around in a given period — a plain-English gauge of volatility, or "how wild is this thing lately?" It looks at each bar's full range (including overnight gaps) and averages that over, say, the last 14 bars, giving you a typical move size. Traders use it to set smart stop-losses and position sizes: a calm stock that moves $1 a day needs a tighter safety net than a jumpy one swinging $10. Like deciding how far back to stand from someone — a gentle wave versus a flailing dancer — based on how much they usually move.
Also called: Average True Range
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