What is ATR?
ATR measures movement magnitude rather than direction. It incorporates gaps through the True Range calculation and then smooths those values over a lookback period.
What does it measure?
Average recent price range, expressed in the same price units as the underlying market.
How is it calculated?
True Range is the greatest of current high minus low, absolute high minus previous close, or absolute low minus previous close. ATR smooths True Range over N periods.
Common interpretation.
- Rising ATR describes increasing recent volatility.
- Falling ATR describes decreasing recent volatility.
- ATR does not indicate whether price is bullish or bearish.
- The same numerical ATR has different meaning on different instruments and timeframes.
How traders use it for market context.
- ATR can help describe whether current NQ, ES or other futures movement is unusually quiet or active.
- It is also useful for comparing volatility across different sessions or trading days.