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The market's speedometer - measuring how much price typically moves to set smarter stops and targets
The Average True Range (ATR) measures how much an asset typically moves over a set period. It doesn't tell you direction - just magnitude. Think of it as the market's volatility thermometer.
Developed by J. Welles Wilder (who also created RSI), ATR accounts for gaps by using "True Range" - the greatest of: current high-low, high-previous close, or low-previous close. This captures overnight moves that simple range wouldn't.
Key insight: ATR is an absolute value in the asset's currency. A $500 ATR on BTC means it typically moves $500 per day. This is invaluable for setting stops that respect actual market behavior rather than arbitrary percentages.
ATR isn't a directional indicator — it measures volatility. Use it to set stop losses that respect the market's natural movement. A stop at 1.5× ATR gives the trade room to breathe without giving back too much.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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