Average True Range
Average True Range, or ATR attempts to quantify a given market's volatility.
True Range is the greater of:
Current Session (High-Low) or (High-Previous Close) or (Low-previous Close)
Average True Range is then calculated by averaging the True Range for a specific time period. Frequently used for calculating stop-loss orders, effort should be made to generate a statistically significant ATR while avoiding excessive damping. For example, ATR for three trading sessions probably uses too few sessions to be statistically significant. A very large number would offer too much damping of volatility, so ATR for 100 sessions would almost certainly be too many. Credit for developing ATR as a trading tool is given to J. Welles Wilder.