# The average true range

> The same 4% move is a yawn in one stock and a shock in another. Judge real days as normal or event, then let ATR — a stock’s own daily range — reveal which they were.

> A chart-reading lesson from screenmytrade. Information only — not investment advice.
> It teaches how to read a technical signal on a real historical chart; it is not a
> recommendation, a rating, or a prediction.

## The idea

A stock drops 4% in a day. Big deal — or an ordinary Tuesday? Depends entirely on the stock. For a sleepy name that drifts a point a day, −4% is a real event. For one that swings 4% before lunch, it's noise. The move alone tells you nothing; you have to know what **normal** looks like first.

The **average true range** (ATR) is that yardstick — a 14-day average of the daily range (the largest of high minus low, high minus prior close, or low minus prior close), so it captures how far this stock usually travels in a session, gaps and all. Measure any move in ATRs and it becomes comparable across stocks: under about **1 ATR** is normal daily noise; **1.5 ATRs or more** is a real event.

Each chart below ends on one dramatic day. Call it — **normal day** or **real event** — then reveal the ±1-ATR "normal" band and see whether the move stayed inside it.

## The interactive

On the live lesson page, this concept is taught as a short game played on real market
history — you make a call, then the chart reveals whether the math agrees. The markdown
mirror carries the explanation; the game itself lives at the page below.

## What it comes down to

The traps are the whole point. A +4% day that never left the band was a normal day for a jumpy stock; a −3.5% day that punched clean through was a real event for a calm one. The percentage fooled the eye both times — the ATR didn't.

That's why traders size moves in ATRs, not raw percent: it's a stock-specific, time-varying ruler. The same number drives stop placement — a stop closer than 1 ATR sits inside the noise the band shows, so ordinary movement is likely to reach it.

## Check your reading

**Two stocks both have a stop 3% below price. Stock A has an ATR of 1.5% of price; Stock B has an ATR of 4%. Which stop is wider in ATR terms?**

- **Stock A — its stop is 2 ATRs away** ✓
- Stock B — it is more volatile

Stock A: 3% / 1.5% = 2 ATR. Stock B: 3% / 4% = 0.75 ATR. The same dollar distance is wider for the quieter stock.

**A calm stock that usually moves ~1.5% a day drops 3.5% on a session. In ATR terms, what kind of day is that?**

- **A real event — the move is over 2 ATRs** ✓
- A normal day — 3.5% is a small move

3.5% ÷ 1.5% ≈ 2.3 ATRs, well past the ~1.5-ATR line. On a calm stock a modest-looking percentage can still be a genuine event.

**A jumpy stock swings about 4% on an ordinary day. It moves 4% in a session. Normal day or event?**

- **A normal day — that is about 1 ATR for this stock** ✓
- A real event — 4% is a large move

A 4% move is roughly 1 ATR here, inside the normal daily range. A big-looking percentage on a volatile stock is often just a typical session.

## Source

- Interactive lesson (play it): https://screenmytrade.com/learn/atr-room
- All lessons: https://screenmytrade.com/learn
- Next lesson: https://screenmytrade.com/learn/quiet-volume
- Methodology (how screenmytrade applies these signals daily): https://screenmytrade.com/methodology

When citing, attribute to "screenmytrade" and link the lesson page. This is educational
chart-reading content, never advice or a prediction.