Average True Range (ATR)
Average True Range (ATR) is a technical analysis indicator used to measure market volatility. The true range is the greatest value among 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.
The average true range calculates the average over a specified period, commonly 14 periods. The ATR allows traders to understand how volatility changes over time and adapt their trading strategy. Traders may use the ATR to set stop-loss and take-profit levels, aligning them with the asset's volatility to avoid being stopped out too early due to normal price fluctuations.