ATR (Average True Range)
The ATR measures the average range of candles, gaps included, over a period, often 14. It is used to size stops and positions.
Developed by Wilder, the ATR starts from each candle's “true range”: the largest of the high-to-low range, the high to the previous close, or the low to the previous close. It then smooths these into an average.
It shows no direction, only volatility, expressed in price units: pips on EUR/USD, dollars on gold, points on the DAX.
Its most useful application: placing a stop at a distance consistent with market noise, for example 1.5 ATR from the entry, then cutting your position size when the ATR rises to keep the same risk in money.