ATR Calculator — Average True Range
Calculate Average True Range (ATR) from candle data or use a known ATR value for stop loss and take profit placement.
ATR Calculator — Average True Range
Calculator
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Formula: TR = max(H−L, |H−Prev Close|, |L−Prev Close|) | ATR = Average of TR over N periods
Worked example — Long: SL 1.0925 | TP 1.1100 | RR 1.33:1
Formula
TR = max(H−L, |H−Prev Close|, |L−Prev Close|) | ATR = Average of TR over N periods
True Range captures the full extent of price movement including gaps. ATR averages these True Range values over N periods (typically 14). For stop losses, multiply ATR by a multiplier (1.5x, 2x, etc.) and subtract from entry for longs or add to entry for shorts. This gives dynamic stops that adapt to market volatility.
Worked Examples
Example 1: ATR-Based Stop Loss for EUR/USD
Problem:ATR = 0.0050 (50 pips), Entry: 1.1000, 1.5x ATR stop, 2x ATR target.
Solution:SL Distance = 0.0050 × 1.5 = 0.0075 (75 pips) TP Distance = 0.0050 × 2.0 = 0.0100 (100 pips) Long SL = 1.1000 - 0.0075 = 1.0925 Long TP = 1.1000 + 0.0100 = 1.1100
Result:Long: SL 1.0925 | TP 1.1100 | RR 1.33:1
Example 2: ATR Calculation from Candle Data
Problem:Given 14 candles of HLC data, calculate ATR and assess volatility.
Solution:True Range for each candle = max(H-L, |H-prevC|, |L-prevC|) ATR = Average of all True Range values Volatility = ATR / Price × 100 If ATR% < 0.3% = Low, 0.3-0.7% = Moderate, >0.7% = High
Result:ATR gives adaptive stop loss and take profit levels
Frequently Asked Questions
What is the Average True Range (ATR)?
The Average True Range (ATR) is a technical analysis indicator created by J. Welles Wilder Jr. that measures market volatility. It calculates the average of the True Range over a specified period (typically 14 candles). The True Range for each period is the greatest of: current high minus current low, absolute value of current high minus previous close, or absolute value of current low minus previous close. ATR does not indicate price direction — only the degree of price movement (volatility). A higher ATR means more volatility, while a lower ATR indicates a quieter market.
Where should an ATR-based stop loss be placed?
ATR-based stop losses adapt to current market volatility. The most common approach is to set your stop loss at 1.5 to 2 times the ATR below your entry (for longs) or above your entry (for shorts). For example, if ATR is 50 pips and you use a 1.5x multiplier, your stop loss is 75 pips from entry. This ensures your stop is placed beyond normal market noise. In volatile markets, ATR increases so your stop automatically widens. In quiet markets, ATR decreases so your stop tightens. This is more effective than using fixed pip stops.
What is a good ATR multiplier for trading?
Common ATR multipliers: 1.0x ATR is considered tight — may get stopped out by normal volatility. 1.5x ATR is standard — good balance between protection and room to breathe. 2.0x ATR is conservative — gives more room but requires larger account or smaller position size. 3.0x ATR is used for swing trades and longer-term positions. The best multiplier depends on your trading style, timeframe, and pair. Day traders often use 1.0-1.5x ATR, while swing traders use 2.0-3.0x ATR. Test different multipliers in backtesting to find what works for your strategy.
How is True Range different from regular range?
The regular range is simply High minus Low of a single candle. True Range accounts for gaps by comparing the current candle's high and low against the previous candle's close. True Range = max(High - Low, |High - Previous Close|, |Low - Previous Close|). This matters because if a candle gaps up, the distance from the previous close to the current high represents actual volatility even though the current candle's high-low range might be small. True Range always captures the full price movement between periods.
What ATR period should I use?
The standard ATR period is 14, as recommended by its creator Wilder. However, different periods serve different purposes: 7-period ATR is more responsive to recent volatility changes, useful for short-term traders. 14-period ATR is the standard — balanced between responsiveness and smoothness. 20-period ATR is smoother and less reactive to single candle spikes. Longer periods (50-100) show the broader volatility trend. Most traders use 14-period ATR. If you find your stops are getting hit too often, consider increasing the period or the multiplier.
How does Wilder's smoothing differ from a simple average of True Range?
ATR Calculator — Average True Range averages the True Range values you supply arithmetically. Most charting platforms instead use Wilder's smoothing, a recursive running average: ATR = (previous ATR x (n - 1) + current TR) / n, seeded with a simple average of the first n True Ranges. That is mathematically an exponential average with a smoothing factor of 1/n, so old volatility decays gradually instead of dropping out abruptly. Expect small differences between the two methods on the same candles.
How do I turn an ATR stop distance into a position size?
First convert the ATR stop into money per unit, then divide your risk budget by it. With ATR = 0.0050 and a 1.5x multiplier, the stop sits 0.0075 away, which is 75 pips on a four-decimal pair. On a standard 100,000-unit EUR/USD lot quoted in USD, one pip is USD 10, so a full lot risks 75 x 10 = USD 750. Risking USD 200 means 200 / 750 = 0.27 lots.
What is the difference between ATR and standard deviation as a volatility measure?
ATR averages the True Range, so it measures the actual path price travelled inside each bar and includes overnight gaps. Standard deviation measures how far closing prices scatter around their mean and ignores what happened between closes. That is why Keltner Channels are built from ATR while Bollinger Bands are built from standard deviation. ATR makes no assumption about the shape of the return distribution, which is useful when markets gap or trend persistently.
Why is ATR normalised as a percentage of price before comparing instruments?
Raw ATR is expressed in the instrument's own price units, so 0.0050 on a currency pair cannot be compared with a few hundred points on an index. Dividing ATR by price gives a scale-free figure: 0.0050 at an entry of 1.1000 is 0.45 percent. That normalised value is what the volatility band on this page uses, and it also lets you compare today's volatility with periods when the instrument traded at very different price levels.
When should I use an ATR trailing stop rather than a fixed ATR stop?
A fixed ATR stop is set once at entry and suits trades with a defined target, such as the take-profit levels shown above. A trailing version, often called a chandelier exit, re-anchors the stop to the highest high reached since entry minus a multiple of ATR, and only ever ratchets in your favour. Use it when you are riding a trend of unknown length and would rather give back part of an open profit than cap the move early.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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