Spread to ATR: the filter nobody uses
Posted: Fri Oct 30, 2026 8:06 am
A simple ratio tells whether a market is worth scalping right now: the current spread divided by the recent average true range on the trading timeframe.
If the spread is 1 pip and the one-minute ATR is 2 pips, the ratio is 0.5, which means half of a typical candle's movement goes to cost. That's a poor environment. If the spread is 0.3 pip and ATR is 3 pips, the ratio is 0.1, which is far more comfortable.
A rule could be as simple as: no new trades when spread exceeds 20 percent of ATR. It automatically switches the strategy off during rollover, thin Asian hours, and moments when spreads widen around news.
The filter has a second benefit: it highlights the pairs and times where the cost structure suits scalping. Plotting the ratio by hour for a few pairs often reveals surprising differences.
What threshold would be sensible, and is any cost filter used right now?
If the spread is 1 pip and the one-minute ATR is 2 pips, the ratio is 0.5, which means half of a typical candle's movement goes to cost. That's a poor environment. If the spread is 0.3 pip and ATR is 3 pips, the ratio is 0.1, which is far more comfortable.
A rule could be as simple as: no new trades when spread exceeds 20 percent of ATR. It automatically switches the strategy off during rollover, thin Asian hours, and moments when spreads widen around news.
The filter has a second benefit: it highlights the pairs and times where the cost structure suits scalping. Plotting the ratio by hour for a few pairs often reveals surprising differences.
What threshold would be sensible, and is any cost filter used right now?