The average true range (ATR) is a technical analysis indicator, introduced by market technician J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems, that measures market volatility by decomposing the entire range of an asset price for that period.1

The true range indicator is taken as the greatest of the following: current high less the current low; the absolute value of the current high less the previous close; and the absolute value of the current low less the previous close. The ATR is then a moving average, generally using 14 days, of the true ranges.

Key Takeaways

  • The average true range (ATR) is a market volatility indicator used in technical analysis.
  • It is typically derived from the 14-day simple moving average of a series of true range indicators.
  • The ATR was originally developed for use in commodities markets but has since been applied to all types of securities.