True range includes the previous close
For a bar with a predecessor, true range is the largest of high minus low, the absolute distance from high to previous close, and the absolute distance from low to previous close. This allows a gap between bars to contribute to the range.
In a synthetic example, high is 105, low is 102 and the previous close is 100. The distances are 3, 5 and 2. True range is therefore 5, rather than just the bar’s range of 3. The value remains in the chart’s price units.
The period controls smoothing
The web default uses 14 periods. The first ATR value averages the initial true ranges; subsequent values use (previous ATR × (n − 1) + new true range) / n. Different history starts or timeframes can therefore produce different values.
Points are not yet dollar risk
An ATR reading of five points is not automatically five ticks or five dollars. A monetary amount requires point value, contract count and your execution and cost assumptions. ATR determines neither your stop nor your loss budget. Record the period before comparing trades under different market ranges.