ATR Volatility Alerts
ATR measures the average daily price range of a stock. Monitoring ATR changes helps you dynamically size positions, place stops, and identify when a stock's risk profile has shifted.
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How ATR Volatility Alerts Work
The Average True Range (ATR) measures how much a stock typically moves in a single day, incorporating gaps. A high ATR means the stock is volatile — large daily swings. A low ATR means it's calm.
ATR is most useful for two things: position sizing (smaller positions in high-ATR stocks to keep dollar risk consistent) and stop-loss placement (stops at 1.5–2× ATR below entry give the stock room to breathe without being stopped out by normal volatility).
ATR alerts in Stock Alarm Pro notify you when a stock's daily range expands significantly above historical norms — a sign of changing market conditions or an approaching catalyst. Use this to reassess stop levels and position sizing before a move becomes destructive.
Frequently Asked Questions
- How is ATR calculated?
- ATR uses the True Range — the largest of: today's high minus low, today's high minus yesterday's close, or yesterday's close minus today's low (to capture gaps). A 14-day Wilder smoothed average of True Range gives ATR.
- How should I use ATR for stop-loss placement?
- A common approach: place stops at 1.5–2× ATR below entry. For a $100 stock with $3 ATR, a 2× ATR stop is at $94. This gives the position enough room to avoid being stopped on normal daily noise while limiting downside.
- What does a sudden ATR increase mean?
- A sharp ATR increase signals a shift to higher volatility — often triggered by an earnings report, news event, or change in market conditions. It's a warning to reassess stops and position sizes before the stock's behavior changes.
- How is ATR different from standard deviation?
- ATR captures actual price ranges including gaps; standard deviation measures dispersion of returns. ATR is more directly useful for stop-loss placement and position sizing because it represents the actual dollar swings you'd experience.
Technical indicators are provided for informational purposes only and do not constitute investment advice. Past signal performance is not indicative of future results. Always conduct your own research before making investment decisions.