Average True Range
Measures recent range expansion without predicting direction.
Start with the input, not the story.
Smoothed true range, including overnight or inter-session gaps.
The simulator's exact Wilder-style ATR 14 calculation includes gaps through true range. The panel can rise while price moves up or down; crossing a volatility reference is never a directional signal.
Test each stop rule in its own right. No ATR multiple suits every method, and a high ATR is neither bullish nor bearish.How traders commonly use Average True Range
ATR is widely used to express stops, filters and position size in units that adapt to current volatility.
Measure recent movement size without making a directional claim.
Keep this job separate from entry timing, stop placement and position size.
A useful counterexample
A rising ATR can accompany either an upward or downward move, so it cannot choose trade direction.
Structure for invalidation, ATR for distance, portfolio risk for size
Each part has a different job. If two tools answer the same question, remove one and compare the result.
Defines the price level that disproves the idea.
Expresses the buffer and current movement scale.
Translates stop distance into bounded exposure.
Follow the same order every time
- Choose the ATR period and timeframe, then wait for the candle to close.
- Mark a structural invalidation level without using ATR first.
- Measure the distance from the candidate price to that level in ATR units.
- Apply the same risk budget through the position-size tool.
- Compare several fixed ATR multiples without changing the entry observations.
The indicator is one part of the method
These strategy pages show the market conditions, entry, stop and exit around the indicator.
Volatility-targeted momentum
Scales a simple momentum signal so higher-volatility pairs do not dominate risk.
- ENTRY
- At Monday 00:00 UTC, rebalance selected pairs to inverse-60-day-volatility weights, normalised to 10% ex-ante portfolio volatility and then reduced proportionally to satisfy every cap.
- STOP
- No chart stop. Cut a pair to zero at the next daily open if its one-day loss exceeds 3 × its 60-day daily volatility; suspend all new entries for one week if estimated portfolio volatility exceeds 15%.
- EXIT
- At each weekly rebalance, exit a pair that leaves its top/bottom-two rank, loses the 2% absolute-score threshold or breaches a risk rule; otherwise resize to the new capped target weight.
Donchian breakout
A rules-first breakout framework based on new lookback extremes.
- ENTRY
- Enter at the next H4 open after a completed close above the prior 20-bar upper channel for a long or below the lower channel for a short.
- STOP
- Initial stop is 2.0 × ATR(20) from the actual fill. Size to risk 0.50% of equity, rounded down to 0.01 lot; never add to or widen the position.
- EXIT
- Exit at the next H4 open after a completed close through the opposite 10-bar channel. The initial 2 ATR stop remains active until that exit.
Trend pullback
Research whether shallow retracements inside an objective trend resume in its direction.
- ENTRY
- After eligibility is true, place a market order at the next H1 open when the signal candle closes beyond the highest high of the previous two pullback bars for a long, or below their lowest low for a short.
- STOP
- Place the stop 0.25 × ATR(14) beyond the pullback extreme. Size so entry-to-stop risk equals 0.50% of demo equity, rounded down to 0.01 lot; never widen the stop.
- EXIT
- Place a fixed target at 2R immediately after entry. If neither stop nor target trades first, exit at market after 24 completed H1 bars.
Set up Average True Range on your platform
Match the lesson's period, price input, smoothing and candle timing. Similar names can still produce different values across feeds and platforms.
MT4
Built inAvailable in the standard MT4 indicator library. Names and default settings can differ.
MT5
Built inAvailable in the standard MT5 indicator library. Names and default settings can differ.
TradingView
Built inAvailable in the standard TradingView indicator library. Names and default settings can differ.
“Built in” means the standard platform library contains the underlying indicator. It does not mean its defaults or calculation match every third-party version. Compare the platforms.
Plain-language formula
The same indicator can look slightly different across platforms because the price input, smoothing and rounding may change. Note your settings before comparing two charts.
Where it may help
Volatility-normalised stops, targets, filters and position sizing.
Where it struggles
Directional prediction: a high ATR says movement is large, not where price goes next.
What to pair it with
Pair it with something that answers a different question, such as volatility or market direction. Try the indicator on its own before adding more tools.
The shortcut to avoid
Using the same ATR multiple for every strategy without testing its stop logic.
Try this on a chart
Compare structural stops with 1.0, 1.5 and 2.0 ATR buffers using identical entries.
Use the version made for your platform
The MT4, MT5 and TradingView files are separate source implementations—not renamed copies. Read the code, compile or add it on the intended platform, and compare its output with the lesson before relying on it in practice.
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