Average True Range (ATR) for Crypto: What It Is and How to Use It
Average True Range (ATR) is a volatility indicator introduced by J. Welles Wilder in 1978. It answers one practical question: how far does this asset usually move in a single period? It says nothing about direction — only about size.
How ATR is calculated
For each day, the true range is the largest of three numbers: today's high minus today's low, the distance from yesterday's close to today's high, and the distance from yesterday's close to today's low. The last two capture gaps. ATR14 is a 14-day average of the true range, smoothed with Wilder's method: each new value is (previous ATR × 13 + today's true range) / 14.
Crypto trades 24/7, so gaps between daily candles are tiny and the true range is almost always just high minus low. In practice, ATR14 is the typical daily high-to-low swing over the last two weeks.
Reading ATR for Bitcoin
ATR is quoted in price units. An ATR of 2,300 with Bitcoin at 84,000 means BTC has recently swung about 2.7% from high to low per day. Dividing ATR by price makes it comparable across assets: Solana typically shows a higher percentage than Bitcoin, and tokenized gold (XAUT) a much lower one.
From ATR to a closing-price range
ATR describes the whole day's swing, while traders usually care where the price will close. Price uncertainty grows roughly with the square root of time, so a range for the close is P ± k · ATR · √h, where P is the current price, h is the time left in days, and k is a coefficient calibrated on history. We fit k so the close lands inside the range 80% of the time — see the methodology and the track record.
Limitations
- ATR is backward-looking: it reacts to a volatility spike only after it happens.
- It treats up and down moves the same — it is not a trend signal.
- Sudden news can move price far beyond any ATR-based range. That's why an honest range comes with a published miss rate.