Market analysis
Average true range, for stops and targets that scale with volatility.
Average true range, for stops and targets that scale with volatility. The page states the equation, the units it expects and the rounding it applies, so the result can be reproduced by hand.
A calculator gives you a number. This one feeds the next: account to risk, risk to position size, position size to the trade, and the trade to expectancy, drawdown and risk of ruin.
See the performance tools →True range counts overnight gaps that the bar range alone misses, which is why it is used instead of high minus low.
A high of 1.1720, low of 1.1655, previous close of 1.1690, with ATR(14) at 0.0062 and a 2× stop:
The stop widens in volatile conditions and tightens in quiet ones, which is the entire argument for ATR over a fixed distance.
Between 1.5 and 3 covers most systematic approaches. Wider survives noise but requires a smaller position for the same risk.
Because it ignores gaps. A market that opens well below yesterday’s close had a large true range and a small bar range.
Fourteen is the convention and behaves reasonably on most timeframes. Shorter reacts faster and whipsaws more; longer is steadier and slower to reflect a volatility change.
A calculator answers one question and raises the next. These are the ones this figure feeds into.
Historical and annualised volatility from a price series.
Work backwards from accepted risk and a fixed size to the stop distance that fits.
Average daily range, and how much of today’s range is already spent.
ATR Calculator · rounding shown to the precision displayed