✓ Mathematical
◆ The PatternTrue Range = max(High−Low, |High−Prev Close|, |Low−Prev Close|).
The Average True Range — Wilder's volatility measure (1978). Purely measures volatility, NOT direction.
True Range = max(H−L, |H−Prev Close|, |L−Prev Close|)
ATR = Smoothed average of TR over N periods (default 14)
ATR = Smoothed average of TR over N periods (default 14)
Practical uses:
• Position sizing: Risk 1–2 ATR per trade → adapts to current volatility
• Stop loss: Place stops 1.5–2× ATR from entry
• Volatility filter: High ATR = trending market; low ATR = ranging
• Position sizing: Risk 1–2 ATR per trade → adapts to current volatility
• Stop loss: Place stops 1.5–2× ATR from entry
• Volatility filter: High ATR = trending market; low ATR = ranging
Pattern bridge: Average True Range measures volatility as mean absolute deviation — a close cousin of standard deviation. In ML, gradient clipping uses a similar magnitude threshold.