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ATR-based Position Size Calculator

Calculate position size based on Average True Range (ATR) to set stop losses and manage risk relative to volatility.

ATR-based Position Size Calculator

Calculate position size based on Average True Range (ATR) to set stop losses and manage risk relative to volatility.

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Guide

Using ATR for volatility-based position sizing

  • ATR (Average True Range) measures volatility by averaging true range over a period (typically 14 days). Higher ATR indicates higher volatility.
  • ATR-based position sizing adjusts position size based on volatility, ensuring consistent risk across different assets regardless of their volatility levels.
  • Stop loss distance = ATR × Multiplier (typically 2x ATR). This sets stop loss based on volatility rather than fixed dollar amounts or percentages.
  • Position size = Risk Amount / Stop Loss Distance. Higher volatility (ATR) results in smaller positions to maintain consistent risk.
  • ATR multiplier typically ranges from 1.5 to 3.0. Lower multipliers (tighter stops) require smaller positions, while higher multipliers allow larger positions.

Frequently Asked Questions

ATR, volatility-based position sizing, and risk management

What is ATR?

ATR (Average True Range) is a volatility indicator that measures the average price range over a period (typically 14 days). It helps assess market volatility and set stop losses based on volatility rather than fixed amounts.

How is ATR calculated?

ATR = Average of True Range over N periods (typically 14). True Range = Maximum of (High - Low, |High - Previous Close|, |Low - Previous Close|).

Why use ATR for position sizing?

ATR-based position sizing adjusts position size based on volatility, ensuring consistent risk across different assets. A high-volatility stock gets a smaller position than a low-volatility stock for the same risk amount.

What is a good ATR multiplier?

ATR multiplier typically ranges from 1.5 to 3.0. Lower multipliers (tighter stops) require smaller positions but may be hit by noise. Higher multipliers allow larger positions but increase risk per trade.

How do I find ATR for a stock?

ATR is available on most charting platforms (TradingView, ThinkOrSwim, etc.). Calculate it manually using historical price data, or use the ATR indicator with a 14-period setting.

Does ATR work for all timeframes?

Yes. ATR adapts to different timeframes. Use daily ATR for swing trades, hourly ATR for day trades. Ensure the ATR period matches your trading timeframe.

How often should I recalculate ATR-based positions?

Recalculate when ATR changes significantly (e.g., after major news or volatility spikes), when entering new positions, or periodically (weekly/monthly) to adjust for changing volatility.

Can I use ATR for options or futures?

Yes, but adjust for contract size. For options, use ATR of the underlying asset and adjust for delta. For futures, use ATR of the futures contract and adjust for contract multiplier.

What if ATR is very high?

High ATR indicates high volatility, resulting in smaller positions for the same risk. Consider waiting for lower volatility, using wider stops (higher multiplier), or reducing risk percentage per trade.

How does ATR compare to fixed percentage stops?

ATR-based stops adapt to volatility, while fixed percentage stops don't. ATR stops are wider in volatile markets and tighter in calm markets, providing more consistent risk management across different market conditions.

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ATR-based Position Size Calculator

Calculate position size based on Average True Range (ATR) to set stop losses and manage risk relative to volatility.

How to use ATR-based Position Size Calculator

Step-by-step guide to using the ATR-based Position Size Calculator:

  1. Enter your values. Input the required values in the calculator form
  2. Calculate. The calculator will automatically compute and display your results
  3. Review results. Review the calculated results and any additional information provided

Frequently asked questions

How do I use the ATR-based Position Size Calculator?

Simply enter your values in the input fields and the calculator will automatically compute the results. The ATR-based Position Size Calculator is designed to be user-friendly and provide instant calculations.

Is the ATR-based Position Size Calculator free to use?

Yes, the ATR-based Position Size Calculator is completely free to use. No registration or payment is required.

Can I use this calculator on mobile devices?

Yes, the ATR-based Position Size Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.

Are the results from ATR-based Position Size Calculator accurate?

Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.