GLOSSARY · INDICATORS
What is average true range?
ATR is the average of the true range over a lookback period, measuring how far an instrument typically moves per bar regardless of direction.
Also called: ATR
What it means
True range is the largest of three values — the current bar's high-low, and the distance from each of those to the previous close — which makes it robust to gaps. Averaged, it gives a volatility figure in the instrument's own price units rather than a normalised index.
Why it matters
That unit choice makes ATR the most directly useful indicator for risk. A stop of one and a half ATR is a stop scaled to current conditions, so the same rule produces a wide stop in a volatile week and a tight one in a quiet week without any intervention.
What this changes in practice
On gold this is not optional. XAUUSD volatility varies by a factor of several between quiet Asian sessions and news-driven US ones, so a fixed-dollar stop is far too wide half the time and far too tight the other half. Sizing the stop to ATR and then sizing the position to the stop is the correct order — the lot size calculator handles the second half.
Related terms
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Educational information only, not financial advice. Trading leveraged products carries substantial risk of loss. Last updated 2026-08-11.