ATR

ATR, the average true range, is an indicator that measures how much a stock typically moves in price over a given period, regardless of direction. It captures volatility rather than trend, a stock can have a high ATR while trading sideways just as easily as while trending strongly, because the indicator only cares about the size of price swings, not which way they point.

The starting point is the true range for a single period, which accounts for gaps between sessions rather than just that day's high and low.

The formula is:

ATR is then a moving average of the true range over a set number of periods, usually 14 days. Investors use ATR mainly to size positions and set stop-loss levels in a way that adapts to how volatile a stock is, rather than using a fixed percentage that might be too tight for a volatile stock or too loose for a calm one. A trader might place a stop a certain multiple of ATR below the entry price, so the stop naturally widens for a choppier stock and tightens for a steadier one. A rising ATR also signals that volatility is expanding, which some traders watch for around earnings or major news as a sign that larger price swings are likely.