Which ATR period and multiple should I use?

Common starting points are a 14-period ATR and a multiple between 1.5 and 3, but the right values depend on the timeframe and the strategy. Test a few combinations and prefer a region where neighboring values give similar results.

Should the ATR be computed on the same timeframe as the chart I trade?

It should be computed on the timeframe whose moves the stop has to survive. An ATR on 1-minute bars measures noise that a trade held for an hour will see many times over; an ATR on daily bars is far larger than an intraday stop needs.

Volatility-based position sizing (ATR sizing)

Volatility-based position sizing sets the stop distance as a multiple of a volatility measure such as the average true range and then sizes the position so that the dollar risk stays constant. When volatility doubles, the stop widens and the number of contracts halves.

Senzoukria · Glossary · Updated September 2026

At a glance

Stop distance: k × ATR, in points
Contracts: floor(dollar risk ÷ (k × ATR × point value))
Effect: Same dollar risk in quiet and volatile regimes
Watch: ATR lags; timeframe of the ATR must match the trade

The calculation

Measure volatility on the timeframe the trade lives on, for example a 14-period ATR on 5-minute bars. Place the stop at a multiple k of that ATR, then divide the dollar risk by the dollar value of the stop. With a 600 dollar budget on MNQ at 2 dollars per point, an ATR of 12 points and k = 2, the stop is 24 points, worth 48 dollars per contract, so the size is floor(600 ÷ 48) = 12 contracts. If the ATR rises to 24 points, the stop becomes 48 points, 96 dollars per contract, and the size falls to 6.

The same logic spreads risk evenly across instruments: a volatile contract gets fewer units than a quiet one for the same dollar risk.

Why traders use it

A fixed stop in ticks is tight on a news day and loose on a holiday session; a volatility stop adapts.
Dollar risk per trade stays stable, which keeps losing streaks predictable in dollars.
It links stop placement to how far the market normally moves, rather than to a round number.

Limits

ATR is backward looking. It rises after a volatility spike, when the spike may already be over, and lags at the start of one.
A stop at k × ATR ignores the structure of the chart; a level where the idea is invalidated may be closer or further.
The multiple k is a parameter like any other and should be tested out of sample.
Integer contracts limit precision on full-size contracts.

In Senzoukria

The indicator catalogue includes ATR, ATR % and True Range, ATR Stop lines, the Chandelier Exit at the highest high minus 3 × ATR(22) by default, a Volatility Stop based on ATR(14) × 3, and Risk/Reward Levels that draw 1R, 2R, 3R and −1R from the last close with R = 1.5 × ATR(14) by default. The Session Risk Budget compares the session's developing range with the average range of previous sessions. None of these place orders. To size from them, convert the ATR stop to ticks for the order ticket's risk calculator: on MNQ, with a tick of 0.25 point, a 24-point stop is 96 ticks.

In the same section

This page in other languages

Français

Frequently asked questions

Which ATR period and multiple should I use?: Common starting points are a 14-period ATR and a multiple between 1.5 and 3, but the right values depend on the timeframe and the strategy. Test a few combinations and prefer a region where neighboring values give similar results.
Should the ATR be computed on the same timeframe as the chart I trade?: It should be computed on the timeframe whose moves the stop has to survive. An ATR on 1-minute bars measures noise that a trade held for an hour will see many times over; an ATR on daily bars is far larger than an intraday stop needs.

Keep reading

Strategy researchTest a trading strategy, from observation to challenge rulesDefine an observation, question it with the copilot, write a rule and explore costs, drawdown and fictional challenge limits in an interactive example.Quant · Start hereQuant trading for beginners: from idea to backtestDefine a testable rule, choose suitable data and evaluate later periods after costs.Order flow · HubOrder flow trading: the complete guideThe hub. What order flow is, what it shows — aggression, delta, imbalance, absorption, liquidity — and the tools that read it, each linked to a full guide.