ATR (Average True Range)
Lesson 7 of 125 min5 exercises
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Measuring Volatility
ATR measures how much a stock typically moves, regardless of direction. It's essential for position sizing and stop-loss placement.
Using ATR
Stop-Loss Placement:
- Set stops 1.5-2 ATR away from entry
- This accounts for normal price fluctuations
Position Sizing:
- Higher ATR = Smaller position
- Lower ATR = Larger position acceptable
- Set stops 1.5-2 ATR away from entry
- This accounts for normal price fluctuations
Position Sizing:
- Higher ATR = Smaller position
- Lower ATR = Larger position acceptable
Example
GME ATR = $1.50 Entry: $25 Stop: $25 - (1.5 × $1.50) = $22.75 This gives price room to breathe while limiting risk.
1.5 ATR stop loss example
Tip
SUTOK calculates ATR and ATR% (ATR as % of price) automatically. Higher ATR% = more volatile stock.
Learn · 2/2
Key takeaways
- ATR measures typical price movement/volatility
- Use 1.5-2 ATR for stop-loss placement
- Higher ATR = more volatile, trade smaller
- ATR helps with position sizing
Next: 5 quick exercises. Miss one and it comes back at the end.