This is an explainer of a volatility metric, including how this site computes and publishes it. It predicts nothing. Nothing here is investment advice. Decisions are yours.
ATR, Average True Range, measures how far an asset actually travels in a typical bar: the average of each day's true range over a lookback window, fourteen days by convention. It answers one question, how much does this thing move, and in a market where the answer spans one percent to twenty, that single number does more work than any indicator on the chart.
The definition, from zero
The measure comes from J. Welles Wilder's 1978 book, New Concepts in Technical Trading Systems, the same book that gave traders RSI. For each bar, compute the true range: the largest of three distances, high minus low, the absolute distance from the previous close to the high, and the absolute distance from the previous close to the low. The second and third terms exist because equities gap: a stock can close at 100 and open at 92, and a plain high-minus-low range would miss the overnight cliff. ATR is then simply an average of true range over the last N bars, with N=14 the near-universal default. Nothing proprietary lives anywhere in the formula, which is exactly why it survives: it is arithmetic over public prices, recomputable by anyone, which is the standard every number we publish has to meet.
The 24/7 twist
Crypto simplifies the formula in one honest way: a market that never closes rarely gaps. Each daily bar's open sits on the previous bar's close because trading never stopped in between, so the two gap-catching terms of true range rarely dominate and tr collapses toward plain high minus low most days. The exceptions are structural rather than diurnal: exchange outages, listing halts, and venue migrations can still print a discontinuity, one of the data-hygiene problems our universe construction rules have to handle. What the market gives back in gap simplicity it takes in magnitude: an equity trader's ATR intuition, calibrated to one or two percent daily ranges, is off by a factor of four here. Majors routinely carry daily ranges in the low single digits; liquid alts run 4-8% in ordinary conditions and expand well beyond that in season; and cascade days print ranges that would be circuit-breaker events anywhere else.
Why percentage ATR is the usable form
Raw ATR is denominated in price, which makes it useless for comparison: an ATR of $1,200 on BTC and an ATR of $0.004 on a micro-cap tell you nothing about which one moves more until you divide by price. Percentage ATR, ATR divided by the current price, is the normalized form, and it is the form our Momentum Monitor publishes as its ATR14% column. A reader scanning that column gets the one-glance volatility map of the board: which names are quiet, which are wild, and which have gone from quiet to wild lately, the transition that usually deserves the most attention.
The three jobs ATR actually does
First, stop geometry. An invalidation level placed inside the asset's ordinary range is not a decision, it is a donation to noise: a stop 5% below entry on an asset with an 8% daily ATR gets collected by an ordinary Tuesday, not by a change of thesis. Sizing stops as ATR multiples, rather than as round percentages imported from equities, is the craft this market forces on stop placement. Second, position sizing. Once the stop distance is honest, the size follows by division, and volatility shrinks it mechanically: the wilder the asset, the wider the honest stop, the smaller the defensible position at fixed risk. Third, regime description. Volatility clusters: quiet periods and violent periods each persist, so a board-wide expansion of ATR percentages is itself information about the tape's character, the compressed-coil versus full-storm distinction that raw price change does not carry.
Honest limits
Four, stated plainly. ATR is a lagging average: a fourteen-day window takes days to register a regime change, and the morning after a cascade the reading is inflated by exactly one historic bar for two weeks, which is a data artifact as much as a description. It is direction-blind: an 8% ATR describes an asset falling apart and an asset melting up identically, so it pairs with trend measures rather than replacing them. It is window-sensitive: ATR7 and ATR30 can tell different stories on the same chart, and any published use should name its window, which is why our column carries the 14 in its name. And it describes, never predicts: today's range says nothing binding about tomorrow's, particularly in a market that never closes, where the largest bars arrive on no schedule. Used inside those limits, ATR is the most honest single number in technical analysis: no interpretation, no theory, just how far the thing actually moves. In the most volatile liquid market on earth, knowing that number before acting is not optional. Decisions are yours.