Basis for stop placement: a stop tighter than 1×ATR gets hit by noise.
The short answer
- What is Average True Range (ATR)?
- Average True Range: the average of the largest of three distances (high−low, and each against the previous close).
- When does ATR get it wrong?
- It gives no direction and no trend strength, only distance. Its current reading on platform symbols, at the last daily close, is in the "Reading now" table on this page. Reading now →
Reading now
| Ticker | Value | Five sessions ago | Status |
|---|---|---|---|
| SPY | 6.06 | 6.79 | Equals 0.78% of price |
| QQQ | 8.84 | 9.16 | Equals 1.19% of price |
| IWM | 3.43 | 3.69 | Equals 1.24% of price |
| DIA | 4.95 | 4.95 | Equals 0.96% of price |
A description of where the number sits against its thresholds. It is not an entry or exit signal.
Indicator limit
It gives no direction and no trend strength, only distance.
Read it with
Parabolic SAR: ATR sets the stop distance, and Parabolic SAR moves it along with price.
Answers: Where should the stop go?
What it actually does
Average True Range measures the size of the usual daily move in dollars, not its direction. For each session it takes the widest of three distances (high minus low, high minus yesterday's close, low minus yesterday's close). That captures the overnight gap that a simple range misses. Then it averages them over a window.
Its first use: position size and stop
It is a risk tool before it is an indicator. A stop tighter than the usual session range gets hit by noise, not by a wrong idea. So the stop distance is set as a multiple of this indicator (1.5 or 2 by convention), and position size comes from that distance, not the other way around.
Comparison across assets
Its absolute value means little between two symbols: $2 on a $100 stock is not the same as $2 on a $10 stock. So it is expressed as a percentage of price to make comparison possible, and each asset is compared with its own history.
Hypothetical example
A stock at $80 with an indicator reading of $2.40: a stop one dollar away sits inside normal session noise and often gets hit even when the idea was right. A stop at $3.60 (a 1.5 multiple) gives the idea room to breathe, and the math then forces a smaller size.
Where it errs and why
It says nothing about direction, and a rise does not mean a decline is coming. It also lags like the others: it describes recent past volatility and can double in a single session after news.
Read it with
Read it with Implied Volatility: the first says what happened and the second what is priced next, and the gap between them is the Volatility Risk Premium. Read it with Bollinger Bands because their width comes from the same volatility. And read it with account size, since position size comes from the stop distance it measures, not from a wish for a certain size.
Where to see it on the platform
The position-size calculator uses the stop distance as its main input, and the volatility tools show Realized Volatility next to Implied Volatility with a clear verdict.
