> ## Documentation Index
> Fetch the complete documentation index at: https://docs.quantnomad.com/llms.txt
> Use this file to discover all available pages before exploring further.

# ATR and Signal Sensitivity

> How Average True Range (ATR) measures volatility, and how ATR length and multiplier settings change how often a volatility-based indicator signals.

Many trend-following indicators, including the UT Bot family, scale their signal levels to market volatility. The most common volatility measure is the **Average True Range (ATR)**. Understanding ATR makes it much easier to tune these indicators.

## What ATR measures

ATR measures how much price typically moves per bar, including gaps between bars. It is calculated in two steps:

1. **True Range** for each bar is the largest of:
   * Current high − current low
   * |Current high − previous close|
   * |Current low − previous close|
2. **ATR** is a moving average of the True Range over a chosen number of bars (the *ATR length* or *period*).

```text theme={null}
TR  = max(high − low, |high − close[1]|, |low − close[1]|)
ATR = moving average of TR over N bars
```

ATR is expressed in price units. An ATR of 50 on an index means bars have recently moved about 50 points on average. Because it's in price units, ATR values can't be compared directly between different symbols.

In Pine Script, ATR is available as `ta.atr(length)`, which uses an RMA (Wilder's) moving average.

## ATR in signal indicators

Volatility-based indicators typically use ATR to place a level a **multiple of ATR** away from price. Price must travel beyond that level to generate a signal. Two settings control this:

| Setting | Lower value | Higher value |
| - | - | - |
| **ATR length** (period) | ATR reacts faster to recent volatility changes | ATR is smoother and reacts more slowly |
| **ATR multiplier** (sensitivity) | Level is closer to price: more, earlier signals, more noise | Level is further from price: fewer, later signals, less noise |

The multiplier usually has the larger effect on how often signals appear.

> [!NOTE]
>
> Setting names vary between scripts. In QuantNomad's tools, the multiplier is **Multipier** in [UT Bot v2](https://docs.quantnomad.com/free-indicators/ut-bot-v2/settings.md), **Stop Multiplier** in [UT Bot Pro](https://docs.quantnomad.com/premium-indicators/ut-bot-suite/settings.md#stop-engine), and **Key Vaule** in the [Ultimate UT Bot Screener](https://docs.quantnomad.com/premium-indicators/ut-bot-suite/settings.md#ultimate-ut-bot-screener). The ATR length is **ATR Period** or **Volatility Period**.

## Choosing a sensitivity

There is no universally correct setting. A practical approach:

**1. Start with the defaults**

Default values are a reasonable baseline. In UT Bot v2 and UT Bot Pro, that's a multiplier of 1 and a period of 10.

**2. Change the multiplier first**

Adjust it in small steps on the symbol and timeframe you trade, and watch how the number and timing of signals change.

**3. Look at both trending and ranging periods**

A setting that looks good in a strong trend may produce many false signals in a sideways market.

**4. Beware of over-fitting**

Settings tuned to look perfect on one stretch of past data rarely behave the same way on future data. Prefer settings that are reasonable across many periods over settings that are perfect on one.

## Timeframe matters

ATR is measured per bar, so it is much larger on a daily chart than on a 5-minute chart. The same multiplier gives very different signal distances on different timeframes. Settings are not automatically transferable between timeframes.

## Related

* [Understanding Indicator Signals](https://docs.quantnomad.com/guides/indicator-signals.md)
* [How UT Bot v2 works](https://docs.quantnomad.com/free-indicators/ut-bot-v2/how-it-works.md)


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