Average True Range (ATR) Indicator Use on Charts

Average True Range (ATR) is a volatility indicator that measures how much a stock or index typically moves during a candle. ATR does not tell you whether the trend is bullish or bearish; it only tells you the strength of price movement/volatility. How to use ATR on a chart: ATR rising: Volatility is increasing, meaning price movements are becoming larger. This often happens during a breakout, strong trend, or sharp sell-off. ATR falling: Volatility is decreasing, usually indicating consolidation or a sideways market. Breakout + rising ATR: Can provide stronger confirmation that the breakout is accompanied by increased market activity. Breakout + low/falling ATR: The move may lack volatility and can require additional confirmation. Stop-loss: ATR can help create volatility-based stops. For example, a trader may use 1.5 × ATR or 2 × ATR from the entry price rather than using an arbitrary fixed rupee stop. Target/position sizing: ATR can also help understand whether a stock is naturally volatile. A stock with a high ATR requires more room for normal price fluctuations. Example: If a stock is trading at ₹500 and its 14-period ATR is ₹15, the ATR indicates that the stock's recent average true range is around ₹15 per candle. If ATR suddenly rises from ₹15 to ₹25, volatility has increased substantially. Important: ATR should generally be used along with price structure, support/resistance, trendlines, volume and your entry setup, rather than as a standalone buy/sell signal.