Spread to ATR: a filter that fits on a sticky note
Posted: Sat Oct 31, 2026 9:07 pm
A pair's average true range tells how far it typically moves. The spread tells how much it costs to trade. The ratio of the two shows whether the market offers enough room to be worth the cost.
If the one-minute ATR is 4 pips and the spread is 0.8, the ratio is 0.2. If ATR drops to 2 pips with the same spread, the ratio hits 0.4, and most scalping edges disappear.
Setting a maximum ratio, such as 0.25, gives a clean rule: trade only when movement is large compared with cost. It automatically keeps the strategy out of dead markets and spread spikes.
Both inputs are available in the platform, and the ratio can be calculated with a simple indicator or spreadsheet.
The threshold needs testing against the journal. Compare results above and below candidate cutoffs, and look for a clear break.
This single filter often improves a strategy more than adding another entry condition.
What ratio of spread to range works for the pairs traded?
If the one-minute ATR is 4 pips and the spread is 0.8, the ratio is 0.2. If ATR drops to 2 pips with the same spread, the ratio hits 0.4, and most scalping edges disappear.
Setting a maximum ratio, such as 0.25, gives a clean rule: trade only when movement is large compared with cost. It automatically keeps the strategy out of dead markets and spread spikes.
Both inputs are available in the platform, and the ratio can be calculated with a simple indicator or spreadsheet.
The threshold needs testing against the journal. Compare results above and below candidate cutoffs, and look for a clear break.
This single filter often improves a strategy more than adding another entry condition.
What ratio of spread to range works for the pairs traded?