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True range
True range is the maximum of high-low, |high−previous close|, and |low−previous close|.
Lesson · Technical Indicators
Average True Range
Inspect true range components, see how gaps affect volatility measurement, calculate Wilder ATR and ATR as a percentage of price, and keep volatility separate from direction.
Synthetic educational data
Core concepts
Understand what the indicator calculates, how its parameters affect it, and what it cannot establish by itself.
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Average true range
ATR smooths true range over a selected period to estimate recent absolute movement.
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Volatility, not direction
ATR can rise during rallies, declines, gaps, or unstable ranges. Its sign does not indicate bullish or bearish direction.
Interactive lesson
Change the inputs, inspect the calculation, and compare the indicator with the underlying price data.
PriceGaps are measured from the previous close
True range and ATR14-period Wilder ATR
Calculate and use ATR
Measure movement consistently before using volatility in sizing, filters, or stop logic.
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Calculate all true-range components
Use the current high and low plus the previous close.
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Choose the maximum
The largest component captures either intrabar range or an overnight gap.
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Apply Wilder smoothing
Average true range over the chosen period with a consistent seed and update rule.
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Normalize when comparing
Use ATR divided by price when comparing instruments or price levels with different scales.
True range and volatility
Score 0 / 0Choose the best answer.
Lesson rule
ATR answers how much price has been moving, not which direction it should move.
Common mistakes
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Reading rising ATR as bullishVolatility can rise during either direction or during chaotic sideways movement.
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Using high-low only after a gapTrue range must include distance from the previous close.
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Comparing raw ATR across different price scalesATR dollars are not directly comparable between a $10 and a $500 instrument; normalization helps.
Completion standard
✓
Finish when you can identify the true-range component that controls the bar.
Select a gap bar and a normal bar, calculate all three components, identify the maximum, update ATR, and explain the difference between raw ATR and ATR percentage.
Calculation note: The first true range uses high minus low because no previous close exists. ATR is then calculated with Wilder-style smoothing after a complete seed window.