ATR Calculator (Average True Range)

What is Average True Range (ATR)?

Average True Range (ATR) is a volatility indicator developed by J. Welles Wilder Jr. Unlike many other indicators, ATR does not predict price direction but measures the magnitude of price movements.

At the core of ATR is the "True Range," which considers the volatility of the current period as well as gaps between the previous period's close and the current period's high and low. This makes ATR an excellent tool for measuring market activity and risk management.

How is ATR Calculated?

The calculation process consists of two main steps:

1. Calculate True Range (TR): The TR for each period is the maximum of the following three values:
   • Current High - Current Low
   • |Current High - Previous Close|
   • |Current Low - Previous Close|
2. Averaging Process:
   • Wilder's Smoothing (Default): A smoothed moving average with the formula:ATR_t = (ATR_prev * (n - 1) + TR_t) / n.
   • SMA: Simple Moving Average, directly calculating the average of the past n periods of TR.

How to Use This Calculator for Risk Management?

This tool not only provides ATR values but also directly integrates stop-loss and position size calculations to help you build a more robust trading plan:

1. Volatility-Based Stops

Traditional fixed-point stop losses are easily triggered in volatile markets. Using ATR stops allows you to set stop-loss levels outside the normal volatility range. It's typically recommended to use 1.5x to 3x ATR as the stop-loss distance.

• Long Stop Loss = Entry Price - (ATR × Multiplier)
• Short Stop Loss = Entry Price + (ATR × Multiplier)

2. Scientific Position Management

Based on your risk preference (e.g., risking only 2% of your account per trade), the calculator will tell you how many units of the asset to buy based on the stop-loss distance. This ensures that even if the stop loss is triggered, your total capital loss remains within a controllable range.

Frequently Asked Questions (FAQ)

Why is the default ATR period 14?

14 is the period originally recommended by Wilder, suitable for daily charts. If you're trading on shorter timeframes (such as 5-minute or 15-minute charts), consider increasing the period for smoother data.

What does an increasing ATR mean?

A rising ATR indicates that market volatility is increasing, with price movements becoming more dramatic. This typically occurs at the start of trends, during major news releases, or during market panic.

What data formats can I paste?

You can directly copy price data from Excel, Google Sheets, or TradingView data exports. As long as each line contains "High, Low, Close" in order, it will work.