Glossary
ATR (Average True Range)
Wilder's volatility measure: the smoothed true range of recent bars, usually over 14 periods. It is in price units, not percent.
ATR (Average True Range), introduced by J. Welles Wilder in 1978, measures how far price typically moves per bar. Each bar's true range is the largest of three values: high minus low, the distance from the previous close to the high, and the distance from the previous close to the low. ATR smooths it over 14 bars: new ATR = (previous ATR × 13 + current true range) ÷ 14.
Example
Gold closed yesterday at 4,000.0. Today's high is 4,030.0 and today's low 4,010.0. The three values are 20.0, 30.0 and 10.0, so the true range is 30.0. With a previous ATR of 25.0, the new ATR is (25.0 × 13 + 30.0) ÷ 14 ≈ 25.36 USD.
Why it matters
ATR adapts stops and targets to current volatility. A stop at 2 × ATR is wider on a busy day and tighter on a quiet one, and the money at risk stays the same if position size is adjusted. ATR says nothing about direction.