ATR-based stops and sizing

Risk management · Difficulty: Beginner

Education only. Delayed data. Past results do not predict future results. Not financial advice, and no strategy here promises a profit. Every strategy can lose money, and a rule that worked on past charts may stop working. Practise with virtual money first.

Try it on the desk →

The idea

Average True Range (ATR) measures how far an asset typically moves in a bar. Setting stops by ATR instead of a fixed dollar amount adapts your risk to how wild the market is.

Indicators and settings

ATR 14 and SMA 20. Use the Position-size calculator on the Tools page to turn a stop distance into a size.

Entry rule

This is a risk rule, not an entry signal. Pair it with any entry you are testing.

Exit rule

Place the stop about 1.5 to 2 × ATR from entry. Trail it by 2 to 3 × ATR as the trade moves in your favour.

Stop-loss and risk rule

Position size = amount risked (for example 1% of account) divided by the stop distance. A wider ATR means a smaller position.

Best conditions

Any market. Especially useful when moving between calm and volatile assets.

Pitfalls

Stops too tight get hit by normal noise; too wide risk too much if size is not reduced.
ATR does not predict gaps or news shocks.

Try it on the desk → Position-size calculator All strategies

Illustration only; ignores slippage, tax and most costs. Not financial advice.