Calculate a volatility-based stop distance from Average True Range and your chosen multiplier.
How this is calculated
Stop distance = ATR value × ATR multiple
Long stop price = entry price − stop distance
Short stop price = entry price + stop distance
Stop as % of entry = stop distance ÷ entry price × 100
Worked example
Long entry 182.40, ATR reading 3.20, multiple 1.5.
Stop distance = 3.20 × 1.5 = 4.80.
Long stop = 182.40 − 4.80 = 177.60.
Stop as % of entry = 4.80 ÷ 182.40 × 100 = 2.6%.
Understanding ATR-based stops
Average True Range measures the average size of recent bar ranges, including the portion created by gaps between one bar's close and the next bar's open. Multiplying that reading produces a stop distance that scales with how far the instrument has actually been moving rather than with a fixed dollar amount chosen in advance. On a quiet instrument the resulting stop is tight; on a volatile one it is wide, without the trader changing any setting.
The multiple is a choice, not a constant. No ATR multiple is inherently correct. Values between 1x and 3x appear frequently in published material, but that reflects convention rather than any established result, and the correct value for a given plan depends on the timeframe, the instrument and where the invalidation level sits on the chart. The reference table on this page shows several multiples side by side so the trade-off is visible without retyping the inputs.
The consequence of a wider multiple is mechanical: for the same cash risk, a wider stop produces a smaller position. If an account risks a fixed dollar amount per trade, doubling the stop distance halves the number of shares or contracts. That is arithmetic, not a judgement — it neither improves nor worsens outcomes on its own. It does change what a single adverse move costs and how much of the instrument's ordinary noise the position can absorb before the stop is reached.
ATR is backward-looking. It summarises the period already observed and does not forecast the next range, so a change in volatility regime can make a recent reading a poor description of current conditions. A reading taken immediately after an earnings gap or a macro release will be inflated by that single event for as many bars as the averaging period covers. Some traders address this by reading ATR from a longer period, others by excluding event bars manually; both are choices with their own distortions.
The period and timeframe of the reading matter as much as the multiple. A 14-period ATR on a 5-minute chart and a 14-period ATR on a daily chart describe entirely different distances, and mixing an intraday entry with a daily ATR produces a stop far outside the intended holding period. Read the ATR from the same chart the trade is being managed on, and enter the value exactly as the platform reports it — the calculator applies the multiple and the direction, and does nothing else to the number.
Frequently asked questions
Where do I find the ATR value?
Most charting platforms plot Average True Range as an indicator; read the current value for the timeframe and period you trade.
Which multiplier should I use?
That is defined by your own plan. Common references range from 1x to 3x, but the calculator applies whatever value you enter.
Does the ATR period matter?
Yes. A 14-period ATR on a 5-minute chart describes a very different distance from a 14-period ATR on a daily chart.
Is an ATR stop better than a fixed stop?
It is different, not better. It scales with recent range instead of staying constant, which changes position size for the same cash risk.