Definition
Average True Range (ATR) is a technical analysis metric that measures the degree of price volatility for a financial asset over a specified number of periods. It is derived from the “true range,” which captures the most extensive price movement between consecutive periods, including gaps between closing and opening prices. ATR is expressed in the same units as the asset’s price, such as dollars or token units, and does not indicate direction, only magnitude of movement. In crypto markets, it is commonly applied to price data on various timeframes, such as hourly, daily, or weekly candles.
As a volatility-focused metric, ATR provides a single numerical value that summarizes how much an asset’s price typically fluctuates within each period of the chosen lookback window. Higher ATR values correspond to more volatile price behavior, while lower values indicate relatively stable price action. Because it is based on historical price ranges, ATR is considered a backward-looking, descriptive measure rather than a predictive indicator. It is widely used across asset classes, including cryptocurrencies, to characterize market conditions in a standardized way.
Context and Usage
Within trading and market analysis, Average True Range serves as a reference point for understanding how “active” or “quiet” an asset’s price has been over recent periods. It helps distinguish between environments where price swings are broad and frequent and those where price changes are relatively contained. Because ATR is independent of price direction, it can describe volatility during both rising and falling markets in a consistent manner.
ATR is often considered alongside other technical metrics to form a more complete picture of an asset’s risk and behavior. In crypto trading, it is commonly monitored on different timeframes to align volatility assessment with a trader’s preferred horizon. As a standardized volatility gauge, ATR allows comparison of the relative choppiness of different tokens or timeframes, even though the absolute values will differ with each asset’s price level.