Average True Range (ATR)

Average True Range (ATR) is a technical analysis tool that measures market volatility by averaging the true range over a specified period. The true range considers the highest of three values: the current high minus the current low, the absolute value of the current high minus the previous close, and the absolute value of the current low minus the previous close. By smoothing these values over time, ATR provides insight into how much an asset's price typically fluctuates, helping traders assess risk and set appropriate stop-loss levels. Higher ATR indicates more volatility; lower ATR suggests quieter market conditions.