--- title: "ATR Indicator: Average True Range Explained - Get Funded Now" description: "ATR stands for average true range, a measure of volatility. How ATR 14 is calculated, how to use it for stops and position size, and its limits." url: "https://getfundednow.com/learn/atr-indicator" language: "en" last_modified: "2026-09-22" publisher: "Get Funded Now (getfundednow.com)" translations: es: "https://getfundednow.com/es/learn/atr-indicator" pt-BR: "https://getfundednow.com/pt-br/learn/atr-indicator" fr: "https://getfundednow.com/fr/learn/atr-indicator" it: "https://getfundednow.com/it/learn/atr-indicator" de: "https://getfundednow.com/de/learn/atr-indicator" disclosure: "All trading at Get Funded Now is simulated. 'Funded' means a simulated or virtual account; GFN is not a broker and does not hold client funds." --- Indicators # ATR: how far a market typically moves. ATR stands for average true range, an indicator created by J. Welles Wilder that measures how much a market typically moves per bar, gaps included. ATR 14, the common setting, averages the true range over 14 bars. It measures volatility, not direction, and traders use it mainly to set stop distances and position sizes. [All trading lessons](https://getfundednow.com/learn) · [Read the trading rules →](https://getfundednow.com/rules) ## What true range is A bar's true range is the largest of three distances: the bar's high to its low; the high to the previous close; and the low to the previous close. Including the previous close means a gap between bars counts as movement, which a simple high-to-low range would miss. ATR is a smoothed average of the true range. Wilder recommended 14 periods, which is why ATR 14 is the default on most charts. A higher ATR means wider typical bars - more volatility - in the instrument's own price units. ## Using ATR for stops and position size A common approach sets the stop at a multiple of ATR from entry, so that the stop sits beyond the market's normal noise. The multiple is a choice, often between 1 and 3. Position size then follows from that distance and the amount of money the trade may lose, as on the [lot size](https://getfundednow.com/learn/lot-size) page. The effect is that position size shrinks automatically when volatility rises and grows when it falls, keeping the money at risk steady. The [position size calculator](https://getfundednow.com/tools/position-size-calculator) does the arithmetic. ## ATR across timeframes and markets ATR is in price units, so it cannot be compared directly between instruments: an ATR of 1.5 on gold and 0.0080 on a currency pair measure different things. It also depends on the timeframe - a daily ATR is much larger than a five-minute one. Compare ATR with its own history on the same chart. Step by step ## How to identify it Use ATR as an input to risk, not as a signal. 1. Add ATR with a 14-period setting to your trading timeframe. 2. Read its current value in the instrument's price units, or convert it to pips. 3. Choose an ATR multiple for your stop and keep it fixed while testing. 4. Calculate position size from that stop distance and your risk per trade. Worked example ## The concept, walked through ### Sizing from ATR, described An illustrative calculation on a $100,000 simulated account, on a USD-quoted pair where a standard lot is worth $10 a pip. It is not a recommendation. 1. 1. ATR The daily ATR 14 reads 0.0080, or 80 pips. 2. 2. Stop The trader uses 1.5 x ATR: a 120-pip stop. 3. 3. Size Risking $500: $500 / (120 x $10) = about 0.41 lots. If ATR doubled to 160 pips, the same rule would halve the size to about 0.2 lots and keep the risk at the same dollar amount. ATR set the distance; it did not say which way price would go. Common mistakes ## Where traders go wrong ### Reading ATR as direction A rising ATR means larger moves, up or down. ### Comparing ATR between instruments It is in each instrument's own price units. ### Keeping a fixed stop when volatility changes A stop that suited a quiet week can sit inside the noise of a volatile one. Limitations ## What it cannot tell you No chart concept predicts price. These are the limits worth keeping in view. - ATR is backward-looking; volatility can change sharply after a release or a gap. - An ATR-based stop still fills where the market trades, and can slip beyond the planned distance. In an evaluation ## Using it on a simulated account Sizing from ATR keeps the money at risk constant, which is what matters against the daily loss limit - $3,000 on Instant or $5,000 on 1 Step and 2 Step on a $100,000 account. On volatile days, a fixed lot size with an ATR stop quietly increases risk; recalculate the size instead. - [What is the daily loss limit?](https://getfundednow.com/rules/daily-loss-limit) - Trading rule - The ceiling a stop distance is measured against - 3% on Instant and 5% on 1 Step and 2 Step. - [Is there a maximum lot size?](https://getfundednow.com/rules/margin-and-lot-size) - Trading rule - How size is bounded on a simulated account. - [Does slippage excuse a breach?](https://getfundednow.com/rules/slippage-and-spreads) - Trading rule - Why a volatile stop can fill beyond its level. Questions ## Asked about this concept Average true range. It measures how much a market typically moves per bar, including gaps between bars, and was introduced by J. Welles Wilder. The average true range calculated over the last 14 bars of the chart's timeframe. Fourteen is the period Wilder recommended and the usual default. Keep learning ## Related lessons - [VWAP: Volume-Weighted Average Price](https://getfundednow.com/learn/vwap) - Indicators and trading styles - The volume-weighted average price - its formula, why it resets each session, how traders read price above and below it, and why forex volume complicates it. - [Backtesting a Trading Strategy](https://getfundednow.com/learn/backtesting) - Indicators and trading styles - How to test a strategy's rules on historical data, the costs and biases a fair test must include, and why a good backtest is not a forecast. - [Lot Size in Forex: What It Means](https://getfundednow.com/learn/lot-size) - Risk and performance - Standard, mini and micro lots, what 0.01 lot is worth, how gold lots differ, and how to work out the lot size a stop and a risk amount allow. - [Swing Trading Forex: How It Works](https://getfundednow.com/learn/swing-trading-forex) - Indicators and trading styles - Holding currency positions for days to weeks - the timeframes swing traders use, the costs that come with holding, and the gap risk. - [Keltner Channel: How It Works](https://getfundednow.com/learn/keltner-channel) - Indicators and trading styles - Bands set a multiple of average true range around a moving average - how the channel is built, how it differs from Bollinger Bands, and its uses. - [CCI Indicator: Commodity Channel Index](https://getfundednow.com/learn/cci-indicator) - Indicators and trading styles - The commodity channel index - how it measures price's distance from its average, what the +100 and -100 levels are taken to mean, and its limits. Sources ## What this page relied on 1. [Average true range](https://en.wikipedia.org/wiki/Average_true_range) - Wikipedia. Retrieved 23 September 2026. The true range definition, Wilder's origin of the indicator and his 14-period smoothing. Educational content only, not investment advice or a recommendation to trade. Chart concepts describe what price has done; none of them predicts what it will do, and trading any strategy can lose money. Get Funded Now accounts are simulated and trade virtual funds. Last reviewed 22 September 2026. Ready when you are ## Your capital stays yours. The risk is ours. One evaluation fee, no time limits and up to 90% of simulated profits. Pick an account size and your credentials arrive by email within minutes. 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