{"id":12173,"date":"2026-05-22T13:38:20","date_gmt":"2026-05-22T13:38:20","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/atr-average-true-range\/"},"modified":"2026-05-22T13:38:20","modified_gmt":"2026-05-22T13:38:20","slug":"atr-average-true-range","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/atr-average-true-range\/","title":{"rendered":"ATR (Average True Range)"},"content":{"rendered":"<p>Average True Range, or ATR, is a <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/volatility\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">volatility<\/a> indicator developed by J. Welles Wilder. It measures the average range a stock moves over a recent period, accounting for gaps between sessions. ATR does not tell you direction &#x2014; it tells you how much a stock typically moves in a day. Every disciplined Indian trader uses ATR to size positions and set stop losses.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>ATR measures average daily price range, capturing both intraday and overnight moves.<\/li>\n<li>It does not indicate trend direction &#x2014; only volatility.<\/li>\n<li>Default period is 14; shorter for intraday, longer for <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/positional-trading\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">positional trading<\/a>.<\/li>\n<li>Used widely for stop-loss placement and <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/position-sizing\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">position sizing<\/a>.<\/li>\n<li>Rising ATR signals expanding volatility; falling ATR signals consolidation.<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"how-atr-is-calculated\">How ATR is calculated<\/h2>\n<p>For each period, the True Range (TR) is the largest of:<\/p>\n<ul>\n<li>Current high minus current low<\/li>\n<li>Absolute value of current high minus previous close<\/li>\n<li>Absolute value of current low minus previous close<\/li>\n<\/ul>\n<p>ATR is a 14-period exponential average of TR values. The previous close component ensures gap moves between sessions are captured.<\/p>\n<h2 id=\"why-atr-matters-for-position-sizing\">Why ATR matters for position sizing<\/h2>\n<p>Suppose you have &#x20B9;1 lakh and want to risk no more than 1% per trade (&#x20B9;1,000). Reliance has an ATR of &#x20B9;40. If you place a stop loss two ATRs away (&#x20B9;80), you can buy &#x20B9;1,000 \/ &#x20B9;80 = 12 <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shares\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">shares<\/a> without exceeding your risk. ATR-based position sizing helps adapt to each stock&#x2019;s natural volatility instead of forcing fixed rupee stops on <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/stocks\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">stocks<\/a> that move very differently.<\/p>\n<h2 id=\"atr-based-stop-losses\">ATR-based stop losses<\/h2>\n<p>Two common methods:<\/p>\n<ol>\n<li><strong>Static ATR stop:<\/strong> Place the stop at entry &#xB1; 2 &#xD7; ATR.<\/li>\n<li><strong>Chandelier exit:<\/strong> Trailing stop set at the highest high (or lowest low) minus 3 &#xD7; ATR.<\/li>\n<\/ol>\n<p>Both methods adjust to volatility &#x2014; wider stops in choppy stocks, tighter stops in calm ones.<\/p>\n<h2 id=\"reading-atr-for-setups\">Reading ATR for setups<\/h2>\n<ul>\n<li><strong>ATR squeeze:<\/strong> Falling ATR over many sessions = volatility contraction; often precedes a breakout.<\/li>\n<li><strong>ATR spike:<\/strong> Sudden rise = volatility expansion; can signal news, results, or trend acceleration.<\/li>\n<li><strong>ATR divergence:<\/strong> New price high without ATR rising = trend losing energy.<\/li>\n<\/ul>\n<h2 id=\"atr-values-across-instruments-rough-guide\">ATR values across instruments (rough guide)<\/h2>\n<table>\n<tr>\n<th>Instrument<\/th>\n<th>Typical daily ATR<\/th>\n<\/tr>\n<tr>\n<td><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nifty\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Nifty<\/a> 50<\/td>\n<td>100&#x2013;200 points<\/td>\n<\/tr>\n<tr>\n<td>Bank Nifty<\/td>\n<td>300&#x2013;600 points<\/td>\n<\/tr>\n<tr>\n<td>Liquid large-cap stocks<\/td>\n<td>1&#x2013;3% of price<\/td>\n<\/tr>\n<tr>\n<td><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/mid-cap-stocks\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Mid-cap stocks<\/a><\/td>\n<td>2&#x2013;5% of price<\/td>\n<\/tr>\n<tr>\n<td>Highly volatile small-caps<\/td>\n<td>5%+<\/td>\n<\/tr>\n<\/table>\n<h2 id=\"limitations-and-best-practices\">Limitations and best practices<\/h2>\n<ul>\n<li>ATR is non-directional &#x2014; never use it alone for entries.<\/li>\n<li>Adjust period to your time frame: 14 for daily, 5&#x2013;7 for intraday, 21+ for weekly.<\/li>\n<li>Reset ATR after major corporate actions like splits or <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/bonus-issue\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">bonus issue<\/a>s; old values may distort the calculation.<\/li>\n<li>Compare ATR percent (ATR &#xF7; price) across stocks to compare relative volatility fairly.<\/li>\n<\/ul>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"how-is-atr-different-from-standard-deviation\">How is ATR different from standard deviation?<\/h3>\n<p>Standard deviation measures dispe<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/rsi\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>rsi<\/a>on around a mean; ATR measures average range and considers gaps explicitly. ATR is more intuitive for stop-loss placement.<\/p>\n<h3 id=\"can-i-use-atr-on-options\">Can I use ATR on options?<\/h3>\n<p>Yes, on the option <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/premium\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">premium<\/a>. But option-pricing dynamics differ; many traders prefer using ATR on the underlying.<\/p>\n<h3 id=\"does-atr-work-for-crypto\">Does ATR work for crypto?<\/h3>\n<p>Yes. ATR is generic and applies to any time-series of prices.<\/p>\n<h3 id=\"is-a-higher-atr-always-bad\">Is a higher ATR always bad?<\/h3>\n<p>No. Higher ATR means larger possible moves &#x2014; good if you can size correctly and use wider stops.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Average True Range, or ATR, is a volatility indicator developed by J. Welles Wilder. It measures the average range a stock moves over a recent period, accounting for gaps between sessions. ATR does not tell you direction &#x2014; it tells you how much a stock typically moves in a day. Every disciplined Indian trader uses [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12173","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Average True Range, or ATR, is a volatility indicator developed by J. Welles Wilder. It measures the average range a stock moves over a recent period, accounting for gaps between sessions. ATR does not tell you direction &#x2014; it tells you how much a stock typically moves in a day. Every disciplined Indian trader uses&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12173","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12173\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}