ATR-based stops and sizing
Risk management · Difficulty: Beginner
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.