Average True Range is one of a number of technical analysis tools developed by Welles Wilder. Some of the others include the Relative Strength Index, Average Directional Index and the Parabolic SAR.
ATR Bands focus on the degree of price volatility in a stock. They can be used to time the entry into trades and help with setting volatility-based stop-losses.
True Range is calculated by looking at the daily price change and using the greater of three calculations: (high – previous close), (previous close – low) or (high – low).
Average True Range is the True Range calculation over a 5-day period average.
ATR Bands take multiples of the ATR - in this case a default multiple of 3 - and plot them as bands above and below the ATR line.
The ATR time period and multiple can be adjusted by launching the settings modal.