Average True Range
How far this market normally moves in one bar — the unit nearly every threshold in this engine is written in.
- Assumes:
- No other page
- Markets:
- Crypto · Equities · Indices
- Timeframes:
- 15m · 1h · 4h · 1d
What it means
True range is the largest of three distances on a bar: its own high to low, and each of those to the previous close. Taking the previous close into account is what makes it survive a gap. Average True Range is the average of that over a number of bars, conventionally fourteen.
ATR is a measure of size, not of direction. A market with a large ATR is moving a lot; whether it is moving up or down is a different question entirely.
How we detect it
The engine computes ATR from the same open-high-low-close bars every other read uses, with a fourteen-bar period by default and a seven and twenty-eight pair where a fast-versus-slow comparison is wanted.
Its role is mostly invisible. Zone clustering tolerance is 0.75 ATR; near a zone means within one ATR of its edge; a momentum cross is called material only when it is at least a quarter of an ATR from zero; a triangle boundary counts as horizontal when it drifts less than one ATR across the whole fit.
That is deliberate. A threshold written in ATR transfers between Bitcoin and a large-cap equity without being retuned, while a threshold written in per cent or in currency does not.
When the read carries information
- The bar series is continuous and complete, so the previous close in the calculation is a real one.
- The recent period is representative — ATR is an average, and it describes the window it was taken over.
- It is used as a unit of scale, which is the whole of its job here.
When it misleads
- After a volatility shock, ATR stays elevated for as long as the shock sits inside the window, so thresholds built on it widen for a while afterwards.
- On an instrument that trades in a very tight band, ATR can be small enough that ordinary noise clears ATR-based thresholds easily.
- A feed with missing or duplicated bars distorts it silently, because every input to the average looks valid.
How it reaches you
ATR itself is seldom printed on our surfaces. What a reader meets is its consequences: why a zone is a band of a certain width, and why an indicator stayed silent.
It says nothing about direction and nothing about what a reader should do.
A worked example
Constructed example — not market data
A wide swing whose range narrows bar by bar until the series ends at its tightest. Run over this series the engine classifies volatility as compressed, and it reaches that word by ranking the current Bollinger bandwidth against this series' own history rather than against a fixed level — which is why the series has to be long enough to have a history to be ranked against.
Worked example
A worked example for this concept has cleared review and is shown with it.