ATR
How far the price typically moves in one candle. Useful for where to put a stop.
5 minLesson 9 of 102 questions at the end
Key ideas
- 1Average True Range (ATR) is the average size of each candle’s range over 14 candles, counting gaps from the previous close.
- 2It is in price terms: an ATR of 600 on 1h BTC candles means BTC has moved about $600 an hour lately.
- 3A stop closer than one ATR is likely to be hit by ordinary movement. Many traders keep stops 1.5 to 3 ATRs away.
- 4ATR measures how much the price moves, not which way.
How it works
Formula
True range = largest of (high − low, |high − previous close|, |low − previous close|)
The true range counts a gap from the last close as part of the move.
ATR averages the true range over 14 candles. It is in price terms: an ATR of 600 on hourly BTC candles means BTC has moved about $600 an hour lately.
ATR
Made-up candles. ATR rises in the sell-off and falls in the quiet stretch.
Made-up 1h candlesWorked out like Lance Trade’s chart
O 86,843H 87,700L 86,823C 87,501ATR 906.16
Length14
Using it for stops
A stop closer than one ATR is inside ordinary movement and likely to be hit by noise. Many traders keep stops 1.5 to 3 ATRs away, then let the size come from that distance.
What it can’t do
ATR says how much the price moves, never which way. A rising ATR only means the moves got bigger.
Common mistakes
- Using the same stop distance in quiet and wild markets. ATR shows when to widen it, and then to cut the size.
- Reading a rising ATR as bullish. It only says moves got bigger.
Check yourself
Question 1 of 2
ATR on 1h BTC candles is $600. Your stop is $300 from your entry. What is likely?
Keys 1 to 3 pick an answer, Enter checks it
Try it in Lance
Add ATR from Indicators and compare it with the stop distance in the order panel’s risk sizing.
Add ATR