ATR (Average True Range): calculation and reading

ATR measures the size of daily price fluctuation, in price units, without direction.

Updated：2026-11-08

Calculation

1. Each day’s true range (TR) is the largest of these three: today’s high − today’s low, |today’s high − previous close|, |today’s low − previous close|. This way gaps are counted as well.
2. ATR is the N-day average of TR (default 14 days) using Wilder smoothing: new ATR = (previous ATR × (N − 1) + today’s TR) ÷ N.

How to read it

• ATR has the same unit as the stock price (dollars): the larger the value, the larger the recent daily price swings.
• It does not indicate direction; it only measures fluctuation. ATR cannot be compared directly between stocks at different price levels; to compare, divide ATR by the stock price to turn it into a percentage.
• The DMI/ADX calculation also uses ATR.

Limits

ATR is an average of historical fluctuation, so it reacts with some lag when fluctuation suddenly increases; it does not predict future fluctuation.

Where the idea comes from

ATR was introduced by J. Welles Wilder Jr. in 1978. This article explains it in our own words.

This article only explains the calculation and how to read a chart. It is not investment advice.