ATR Bands are channels that are plotted around a stock's Average True Range (ATR).The upper band is plotted along the value of the ATR plus a specified multiple of the ATR.The lower band is plotted along the value of the ATR minus a specified multiple of the ATR.
A stop-loss is a pre-arranged price at which an instruction is automatically issued to a broker to sell or buy a share.
If a stock is very volatile, they might get stopped out when their stop loss is too tight.
For example, if the stock price fluctuates wildly, then traders might get stopped out if the stop loss is placed just 3% below the current price.
More (less) volatile stocks typically have a larger (smaller) ATR.
Traders can therefore use ATR Bands to plot stop losses which account for a stock's volatility.