ATR and Volatility Indicators
An educational overview of the ATR indicator, covering what it measures, its relationship to direction, stop distance, and comparing volatility across markets.
- 7 min read
- For beginners
- Educational
- Bài học 1 trên 5
This unit introduces the Average True Range (ATR), a volatility indicator developed by J. Welles Wilder — the same technical analyst behind RSI, covered earlier in this group. ATR connects directly to the volatility and position sizing concepts introduced in the Market Guides and Risk Management Basics modules.
This overview introduces four areas covered in this unit: what ATR measures, ATR's relationship (or lack thereof) with direction, using volatility to assess stop distance, and comparing volatility across different markets.
This is general educational content. It does not suggest that ATR, on its own, provides trading signals or guarantees any specific outcome.
What Is ATR?
ATR is a volatility indicator developed by J. Welles Wilder, introduced in his 1978 book alongside RSI. Unlike the Bollinger Bands covered in the previous unit, which visualize volatility as an envelope around price, ATR expresses volatility as a single numeric value, typically plotted as a separate line beneath the price chart.
Connecting to Earlier Volatility Concepts
ATR directly connects to the volatility concepts covered in the Market Guides module's Understanding Volatility unit, and to the volatility-position sizing relationship introduced in that same unit and covered in more practical detail in the Risk Management Basics module. This unit builds a bridge between those earlier conceptual discussions and this specific, calculable indicator.
What's Covered in This Unit
- What ATR measures — the True Range calculation underlying the indicator.
- ATR vs direction — an important clarification about what ATR does and doesn't tell you.
- Using volatility to assess stop distance — a practical application connecting to the Risk Management Basics module.
- Comparing volatility across markets — an important nuance about ATR's absolute, rather than relative, nature.
Summary
ATR (Average True Range), developed by J. Welles Wilder, expresses volatility as a single numeric value, connecting directly to the volatility concepts covered in the Market Guides and Risk Management Basics modules. This unit explores what ATR measures, its lack of directional information, its practical use in assessing stop distance, and an important nuance about comparing volatility across different markets.
Frequently Asked Questions
A volatility indicator developed by J. Welles Wilder, expressing volatility as a single numeric value rather than an envelope around price.
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