Saying price is '20 dollars above its moving average' is useless: 20 dollars is a lot in one asset and nothing in another. To compare for real, you have to measure that distance in units of volatility. That's what we use the ATR for.
What the ATR is
The ATR (Average True Range) measures how much an asset moves on average each period. It's the ruler we measure everything else with: stops, targets and, above all, distances.
Normalizing the distance
If instead of measuring the price-to-average distance in dollars we measure it in ATR, we get a number that's comparable across any asset and any timeframe. 'Price is 3 ATR from its average' means the same thing on a stock as on an index or on gold. That's what does with its ATR Distance reading.
What it's for
A high ATR distance warns of overextension: the move has gone far and fast, and the odds of a pause or pullback rise. A low distance means price is hugging its average, in equilibrium. It's not an entry signal; it's a thermometer for how stretched the move has gotten.