How do traders use ATR?

A higher ATR means bigger daily swings and more risk per share. A stop-loss 1.5-3 × ATR away avoids getting stopped out by normal noise. Position size can be set so that 1 ATR of loss equals your planned risk.

Volatility and trend strength

Average True Range (ATR)

ATR is the average size of a candle's full move (including gaps) over the last 14 candles. It tells you how much a stock usually moves, not the direction.

How to read it

A higher ATR means bigger daily swings and more risk per share.
A stop-loss 1.5-3 × ATR away avoids getting stopped out by normal noise.
Position size can be set so that 1 ATR of loss equals your planned risk.

Settings

Default 14 (Wilder smoothing).

Example rule to test

Risk idea: entry ₹500, ATR ₹12, stop-loss 2 × ATR = ₹476.

Common mistake

Using the same fixed-rupee stop for a calm stock and a very volatile one.

Try it free on iTradeChart

Add ATR on a live chart (tap “+ Indicators”) →
Scan NIFTY 500 stocks with ATR conditions →

For learning only. Backtests use past data and do not guarantee future results. Not investment advice.