What Average True Range is actually averaging
A plain-language walk through True Range components before you trust the ATR line on your chart.
Traders often meet ATR as a smooth ribbon and never ask what entered the average. In Orchestrateml lessons we begin with three candidates for True Range on a single session: the high–low span, the absolute gap from the prior close to the high, and the absolute gap from the prior close to the low. The True Range for that bar is the largest of those three.
That detail matters after weekends, holidays, and limit-style moves. An ATR built from fourteen such readings will sit higher when gaps are common, even if intraday ranges look modest. When students calculate a handful of bars by hand, the platform value stops feeling arbitrary.
Lookback length is a separate choice. A short ATR reacts quickly when volatility expands; a longer ATR remembers last month’s quiet tape. Neither is “correct” in the abstract. In training we tie the lookback to the holding period you already use, then audit whether your stop multiples still make sense when the average shifts.
If you only remember one classroom line: ATR is a memory of range magnitude, not a signal that price must reverse or continue.