Average true range (ATR) is a volatility indicator introduced by J. Welles Wilder alongside RSI. It measures how far price typically travels within a bar, and it deliberately ignores direction: a market falling hard and a market rising hard can have the same ATR.
True range first
A bar's plain range is its high minus its low. That misses gaps — if a market closes at 100 and the next bar trades between 110 and 112, the range of 2 badly understates a move of 12. True range fixes this by taking the largest of:
- the current high minus the current low,
- the distance from the current high to the previous close,
- the distance from the current low to the previous close.
ATR is then the average of true range over a window — 14 bars by convention, and in MoonWire reads — using Wilder's smoothing.
Reading it as a percentage
An ATR of 3,000 means something very different for Bitcoin at 60,000 and at 120,000. Our reads therefore quote ATR as a share of price: "ATR14 is 5.6% of price" means the average 3-day bar recently spanned about 5.6% of the asset's value. That makes volatility comparable across assets and across time, and across the nine cells of a multi-timeframe board.
What ATR is used for
- Scaling other measurements. In our support and resistance detection, the tolerance for merging nearby swing points into one level scales with ATR, so levels are grouped more loosely in volatile conditions.
- Distances in volatility units. Saying a level is "2.06 ATRs away" describes how many typical bars of movement separate it from price, which is more informative than a raw percentage alone.
- Regime context. Rising ATR describes an expanding range; falling ATR a compressing one.
ATR says nothing about whether a move will continue. It describes how large recent moves have been.