> ## Documentation Index
> Fetch the complete documentation index at: https://learn.algopilot.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Average True Range (ATR)

**What is it?**\
The Average True Range (ATR) measures how much an asset’s price moves over a period, giving you a sense of its volatility. Think of it as a gauge of how wild or calm the price swings are.

**How is it used?**

* **Volatility assessment**: Higher ATR means more volatility, which can signal breakout opportunities or warn of risky conditions.
* **Stop-loss placement**: Traders often set stop-losses at 1-2x the ATR below/above entry points to account for normal price swings.
* **Position sizing**: In algo trading, ATR can adjust position sizes based on volatility—smaller positions for high ATR, larger for low ATR.

**How is it calculated?**\
ATR is based on the "true range," which is the greatest of:

* The current high minus the current low.
* The absolute value of the current high minus the previous close.
* The absolute value of the current low minus the previous close.

The ATR is then the average of the true ranges over a specified period (commonly 14 days):

TR = Max\[(High - Low), |High - Previous Close|, |Low - Previous Close|]  

ATR = (Previous ATR × (n-1) + Current TR) / n  

Where n is the period (e.g., 14).

<sub>The above content is designed for informational purposes only, and is explicitly not investment advice. Algo Pilot is a US based technology company and not a bank, broker-dealer, or RIA. As such, Algo Pilot LLC does not provide investment advice and is not a member, SIPC. Brokerage services offered by 3rd parties are not directly affiliated with Algo Pilot LLC, and Algo Pilot users may choose the broker relationship that they desire.</sub>