Stock Market Glossary
ATR
Average True Range – indicator for measuring average volatility.
In brief: Average True Range – indicator for measuring average volatility.
Meaning in practice
The ATR measures the average range between high and low of a period, taking price gaps into account. Traders use it to calculate position sizes and stop losses because it quantifies the current “breathing” of a market.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
In practice, the term should be linked to a specific trading plan: entry, exit, position size and costs belong together. In short time frames, spread, slippage and delayed execution can quickly outweigh the theoretical benefit of an observation.
What to keep in mind
Write down which observation confirms or invalidates your assumption before trading. This keeps the term a decision-making tool rather than a retrospective justification for risk already taken.
