ATR-based stops compared with fixed-pip stops
Posted: Sat Oct 31, 2026 9:50 pm
Fixed-pip stops are simple, but they ignore volatility. A 20-pip stop may be wide on a quiet day and very tight on a volatile one. ATR-based stops adjust to recent volatility, which is why many traders prefer them.
A method to compare: apply the same entry signals with a fixed stop and with a stop at a multiple of ATR, such as 1.5 times the 14-period ATR. Adjust position size so risk per trade is equal in both cases. Compare results and drawdowns.
A worked example: if ATR doubles during a volatile week, the ATR stop doubles and position size halves, keeping risk constant. The fixed stop would be hit more often in that week.
The choice of ATR period and multiple affects results, and over-optimising them is a risk. A few round values are usually enough to test.
ATR can also be used for targets, though fixed reward-to-risk ratios are common too.
Which stop method do you use, and why?
A method to compare: apply the same entry signals with a fixed stop and with a stop at a multiple of ATR, such as 1.5 times the 14-period ATR. Adjust position size so risk per trade is equal in both cases. Compare results and drawdowns.
A worked example: if ATR doubles during a volatile week, the ATR stop doubles and position size halves, keeping risk constant. The fixed stop would be hit more often in that week.
The choice of ATR period and multiple affects results, and over-optimising them is a risk. A few round values are usually enough to test.
ATR can also be used for targets, though fixed reward-to-risk ratios are common too.
Which stop method do you use, and why?