How to Set a Volatility Stop with ATR
Convert Average True Range into a volatility-adjusted stop and position size for long or short trade planning.
The concept in plain English
An ATR stop calculator places a protective stop a selected multiple of Average True Range from entry. It then uses that volatility-adjusted distance to calculate a position quantity from the account risk budget.
Open ATR / Volatility Stop CalculatorDo not mix ATR timeframes
An ATR value from a five-minute chart has a different meaning from a daily ATR. Keep the instrument, adjustment convention, lookback and timeframe consistent with the tested strategy. CATCO does not fetch candles or calculate ATR from them; it converts an ATR value into a stop distance. A volatility expansion widens the distance and reduces the risk-sized quantity. It does not tell you which direction the next move will take.
A two-ATR long stop
$100 entry, ATR of $3, a 2× multiple and a $12,000 account risking 1%. Costs are excluded.
Stop distance = $3 × 2 = $6. Stop = $100 − $6 = $94. Quantity = $120 ÷ $6 = 20.
20 units and a $94 stop with $120 of planned price risk.
ATR is entered by you. Use the intended chart timeframe and confirm the stop against the trade thesis.
Calculation method
Stop distance = ATR × selected multiple. Long stops subtract the distance from entry; short stops add it. Quantity = account risk budget ÷ stop distance.
| Input | Purpose |
|---|---|
| Entry price | Anchor for the volatility stop. |
| ATR | Recent average true range of the instrument. |
| ATR multiple | Controls stop distance relative to volatility. |
| Account risk | Sets maximum planned loss and quantity. |
Step-by-step workflow
- Obtain ATR using the intended chart timeframe and lookback.
- Enter direction, entry and the strategy's ATR multiple.
- Apply account risk to calculate quantity and verify the stop against market structure.
Practical benefits
- Adapts stop distance to recent volatility.
- Connects the wider stop to a smaller position automatically.
- Supports consistent risk across instruments.
Questions about ATR / Volatility Stop Calculator
What ATR multiple should I use?
The multiple should come from a tested strategy and timeframe. A universal setting does not fit every instrument or market regime.
Does a wider ATR stop increase risk?
Not when quantity is reduced proportionally. The calculator sizes the position so planned account risk can remain fixed.
Can ATR predict the next move?
No. ATR measures recent movement range, not direction or future return.
Sources and further reading
Examples are hypothetical and exclude costs unless stated. This is educational material, not individualized investment or tax advice. Read our methodology and risk disclosure.