ATR Stop Loss Calculator
This calculator helps determine a dynamic stop loss price based on the Average True Range (ATR) of an asset, your reference price (like entry price), a chosen multiplier, and your trade direction (Long or Short).
Enter the current ATR value, your reference price, a multiplier (typically between 1 and 3), and select your trade direction.
Enter ATR Stop Loss Details
Understanding the ATR Stop Loss
What is ATR?
Average True Range (ATR) is a volatility indicator developed by J. Welles Wilder Jr. It measures market volatility by decomposing the entire range of an asset price for that period. Essentially, it tells you the average distance between the high and low price over a certain number of periods (commonly 14).
How Does an ATR Stop Loss Work?
An ATR stop loss sets your stop price at a certain multiple of the current ATR value away from a reference price (usually your entry price or a recent swing high/low).
- For a Long Trade: Stop Loss = Reference Price - (ATR Value × Multiplier)
- For a Short Trade: Stop Loss = Reference Price + (ATR Value × Multiplier)
This method creates a stop loss that automatically adjusts to the current market volatility. In highly volatile periods, the stop loss is wider, giving the trade more room. In less volatile periods, the stop loss is tighter.
Why Use an ATR Stop Loss?
- Volatility Adaptation: Stops adjust automatically to current market conditions.
- Objective Placement: Reduces emotional decision-making in stop placement.
- Flexible: Can be used across different markets and timeframes.
A common multiplier is 2 or 3, but traders often experiment to find what works best for their strategy and the asset they are trading.
ATR Stop Loss Examples
See how the stop loss price is calculated in different scenarios:
Example 1: Long Trade (Multiplier 2)
Scenario: You enter a Long trade and want to place a stop loss 2 times the ATR away from your entry price.
1. Known Values: Current ATR = 0.75, Reference Price (Entry) = 55.20, Multiplier = 2, Direction = Long.
2. Formula: Stop Loss = Reference Price - (ATR * Multiplier)
3. Calculation: Stop Loss = 55.20 - (0.75 * 2) = 55.20 - 1.50
4. Result: Stop Loss = 53.70.
Conclusion: Place your stop loss order at 53.70.
Example 2: Short Trade (Multiplier 3)
Scenario: You enter a Short trade and want to place a stop loss 3 times the ATR away from your entry price.
1. Known Values: Current ATR = 15.80, Reference Price (Entry) = 1550.00, Multiplier = 3, Direction = Short.
2. Formula: Stop Loss = Reference Price + (ATR * Multiplier)
3. Calculation: Stop Loss = 1550.00 + (15.80 * 3) = 1550.00 + 47.40
4. Result: Stop Loss = 1597.40.
Conclusion: Place your stop loss order at 1597.40.
Example 3: Long Trade (Low Volatility)
Scenario: Trading a less volatile asset with a tighter stop (Multiplier 1.5).
1. Known Values: Current ATR = 0.05, Reference Price (Entry) = 10.30, Multiplier = 1.5, Direction = Long.
2. Formula: Stop Loss = Reference Price - (ATR * Multiplier)
3. Calculation: Stop Loss = 10.30 - (0.05 * 1.5) = 10.30 - 0.075
4. Result: Stop Loss = 10.225.
Conclusion: Place your stop loss order at 10.225.
Example 4: Short Trade (High Volatility)
Scenario: Trading a highly volatile asset with a standard stop (Multiplier 2).
1. Known Values: Current ATR = 50.00, Reference Price (Entry) = 18500.00, Multiplier = 2, Direction = Short.
2. Formula: Stop Loss = Reference Price + (ATR * Multiplier)
3. Calculation: Stop Loss = 18500.00 + (50.00 * 2) = 18500.00 + 100.00
4. Result: Stop Loss = 18600.00.
Conclusion: Place your stop loss order at 18600.00.
Example 5: Long Trade (Using Swing Low)
Scenario: Using a recent swing low as the reference price for a Long trade stop.
1. Known Values: Current ATR = 1.20, Reference Price (Recent Swing Low) = 88.00, Multiplier = 2.5, Direction = Long.
2. Formula: Stop Loss = Reference Price - (ATR * Multiplier)
3. Calculation: Stop Loss = 88.00 - (1.20 * 2.5) = 88.00 - 3.00
4. Result: Stop Loss = 85.00.
Conclusion: Place your stop loss order at 85.00.
Example 6: Short Trade (Using Swing High)
Scenario: Using a recent swing high as the reference price for a Short trade stop.
1. Known Values: Current ATR = 0.30, Reference Price (Recent Swing High) = 22.50, Multiplier = 2, Direction = Short.
2. Formula: Stop Loss = Reference Price + (ATR * Multiplier)
3. Calculation: Stop Loss = 22.50 + (0.30 * 2) = 22.50 + 0.60
4. Result: Stop Loss = 23.10.
Conclusion: Place your stop loss order at 23.10.
Example 7: Long Trade (Aggressive Stop)
Scenario: Using a smaller multiplier for a tighter, more aggressive stop (Multiplier 1).
1. Known Values: Current ATR = 0.90, Reference Price (Entry) = 110.00, Multiplier = 1, Direction = Long.
2. Formula: Stop Loss = Reference Price - (ATR * Multiplier)
3. Calculation: Stop Loss = 110.00 - (0.90 * 1) = 110.00 - 0.90
4. Result: Stop Loss = 109.10.
Conclusion: Place your stop loss order at 109.10.
Example 8: Short Trade (Conservative Stop)
Scenario: Using a larger multiplier for a wider, more conservative stop (Multiplier 4 - less common but possible).
1. Known Values: Current ATR = 25.00, Reference Price (Entry) = 8000.00, Multiplier = 4, Direction = Short.
2. Formula: Stop Loss = Reference Price + (ATR * Multiplier)
3. Calculation: Stop Loss = 8000.00 + (25.00 * 4) = 8000.00 + 100.00
4. Result: Stop Loss = 8100.00.
Conclusion: Place your stop loss order at 8100.00.
Example 9: Long Trade (Fractional Price)
Scenario: Calculating a stop loss for an asset with fractional pricing.
1. Known Values: Current ATR = 0.125, Reference Price (Entry) = 25.375, Multiplier = 2, Direction = Long.
2. Formula: Stop Loss = Reference Price - (ATR * Multiplier)
3. Calculation: Stop Loss = 25.375 - (0.125 * 2) = 25.375 - 0.250
4. Result: Stop Loss = 25.125.
Conclusion: Place your stop loss order at 25.125.
Example 10: Short Trade (Different Asset Type)
Scenario: Calculating a stop loss for a different type of asset like a commodity or crypto.
1. Known Values: Current ATR = 8.50, Reference Price (Entry) = 1880.00, Multiplier = 2.5, Direction = Short.
2. Formula: Stop Loss = Reference Price + (ATR * Multiplier)
3. Calculation: Stop Loss = 1880.00 + (8.50 * 2.5) = 1880.00 + 21.25
4. Result: Stop Loss = 1901.25.
Conclusion: Place your stop loss order at 1901.25.
Important Considerations
The ATR stop loss is a useful tool, but remember:
- Finding ATR: You need to get the current ATR value from your charting platform or trading software. This calculator doesn't calculate ATR itself.
- Multiplier Choice: The multiplier is crucial. A larger multiplier gives more room but increases potential loss; a smaller multiplier reduces potential loss but increases the chance of being stopped out prematurely.
- Entry Price: While entry price is common, some traders use a recent swing high/low as the reference price instead.
- Not Guaranteed: Stop losses help limit risk but do not guarantee protection against large gaps in price, especially in volatile conditions or outside of regular trading hours.
Frequently Asked Questions about ATR Stop Loss
1. What is ATR used for in trading?
ATR (Average True Range) is primarily used as a measure of market volatility. Traders use it to gauge how much an asset's price typically moves over a given period. This information is valuable for setting stop losses, determining position size, and identifying potential breakout points.
2. How does the ATR Stop Loss calculator work?
This calculator takes the current ATR value, your reference price (like entry), a chosen multiplier, and your trade direction (Long/Short). It then calculates the stop loss price by adding (for Short trades) or subtracting (for Long trades) the ATR value multiplied by the multiplier from the reference price.
3. Where do I get the "Current ATR Value"?
You need to obtain the current ATR value from your trading platform or charting software. It's a standard technical indicator you apply to the chart of the asset you are trading, usually set to a specific period (commonly 14) and timeframe (e.g., daily, hourly).
4. What should I use as the "Reference Price"?
The most common reference price is your trade's entry price. However, some traders use a recent significant swing high (for Short trades) or swing low (for Long trades) instead, often combined with a different multiplier or offset logic not included in this basic calculator.
5. What is a typical "ATR Multiplier"?
Common multipliers range from 1.5 to 3. A multiplier of 2 is very popular. A higher multiplier creates a wider stop (more room for volatility, larger potential loss), while a lower multiplier creates a tighter stop (less room, smaller potential loss).
6. Why is an ATR Stop Loss considered "dynamic"?
It's dynamic because the ATR value itself changes over time as market volatility changes. This means the distance of your stop loss from the reference price automatically widens when volatility increases and tightens when volatility decreases, adapting to current market conditions.
7. Can I use this for any asset?
Yes, you can use the ATR stop loss method for most traded assets including stocks, forex, commodities, cryptocurrencies, etc., as long as you can get the ATR value for that asset on your preferred timeframe.
8. Does an ATR stop loss guarantee I won't lose more than the stop distance?
No. A stop loss is an order to close your position when the price hits a certain level. However, in fast-moving markets or during market gaps (e.g., overnight), the price can "gap" right over your stop loss level, and your order might be filled at a worse price (slippage), resulting in a larger loss than intended.
9. Should I use a different multiplier for Long vs. Short trades?
Some traders use slightly different multipliers, but it's not strictly necessary. The key is consistency and testing what works best for your strategy and the specific asset's behavior.
10. Does this calculator trail the stop loss?
No, this calculator provides a static stop loss price based on the inputs *at the time of calculation*. Trailing stops involve recalculating and moving the stop price as the trade moves favorably. To use an ATR trailing stop, you would periodically update the reference price (e.g., using a recent swing high/low or closing price) and the current ATR value, and then recalculate the new stop price using this tool.
