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.