ATR (Average True Range)

ATR (Average True Range) is a volatility indicator that measures how much a stock typically moves over a given period, expressed as a single dollar figure. It's calculated from the "true range" of each period — the largest of the day's high-minus-low, high-minus-prior-close, or prior-close-minus-low — averaged over a lookback period, commonly 14 days. ATR says nothing about direction, only about the size of typical price swings, which makes it a useful tool for sizing a stop-loss to fit a specific stock's normal behavior: a stop set some multiple of ATR away from entry (commonly 2x) scales automatically to how much that stock actually tends to move, rather than using one fixed dollar or percentage distance across every trade. Because ATR is calculated from past price behavior, it can expand suddenly around news or earnings, meaning a stop sized on yesterday's calmer ATR may be too tight for tomorrow's more volatile conditions.