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ATR: sizing volatility

Indicators I

The honesty meter

Average True Range = how much a symbol actually moves per bar. Set stops at 1.5 to 2x ATR so normal noise can't clip you, and size positions so that ATR-distance equals your fixed risk.

Check yourself

Stock A moves $1/day, Stock B $8/day. Same dollar risk means…

  1. Same shares in both
  2. Fewer shares of B with a wider stop correct
  3. More shares of B

Volatility sets the stop distance; the stop distance sets the size. That's professional sizing.

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