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Average True Range (ATR)

StratCraft indicator page for ATR volatility measurement.

Route: /indicators/atr/

What It Does

ATR measures market volatility by averaging the true range over a lookback period. It does not describe direction, only how much price is moving.

Formula

True Range = max(High - Low, |High - Prev Close|, |Low - Prev Close|)

ATR = SmoothedMovingAverage(TrueRange, period) (default period = 14). With a different movav, the selected moving average replaces the smoothed average.

Worked Example

period = 3, illustrative true ranges 2, 3, 4 seed the smoothed average at 3. For the next true range 5: ATR = (3 × 2 + 5) / 3 = 3.67 (rounded).

Parameters

  • period - default 14
  • movav - default SmoothedMovingAverage

Backtrader API

import backtrader as bt
atr = bt.indicators.ATR(data, period=14)

Common Usage

  • Use ATR for stop-loss sizing.
  • Use ATR for volatility filters.
  • Combine ATR with breakout or regime logic.

Practical Pattern

When ATR expands, the market is usually moving faster. When ATR contracts, compression may be building before a breakout.

Source: https://www.backtrader.com/docu/indautoref/

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