A stock's typical daily trading range in dollars, here a close-only 14-day estimate. A larger ATR means the stock normally swings more in a day.
The classic Wilder true-range formula takes the largest of today's high-low, today's high minus yesterday's close, or yesterday's close minus today's low, so it captures overnight gaps. Quantustik computes a close-only estimate over the trailing 14 trading days instead — the average absolute day-over-day closing-price change — which still captures gaps, since a close-to-close move includes any gap, without needing separately cached intraday highs and lows.
A one-size-fits-all stop like "sell if it drops 5%" treats a quiet utility stock and a volatile small-cap identically, even though the small-cap can easily swing 5% in a single ordinary session while the utility rarely does. A stop set at 2x ATR below entry adapts automatically: it gives the volatile stock more room so normal noise doesn't stop the trade out, and keeps the quiet stock's stop tight because it doesn't need the extra room.
A flat percentage treats a quiet stock and a volatile one identically; an ATR-based stop adapts to each stock's actual typical daily range, giving volatile names more room and quiet ones a tighter stop.
ATR is expressed in price dollars over a short trailing window, making it practical for today's stop/target levels; sigma is typically annualised and used for forecasting a probability band's width over a longer horizon.
AAPL analysis shows this metric in context, or browse all S&P 500 tickers.
Educational research only — not investment advice.