Stops that survive normal noise
Use ATR to see whether your stop sits inside everyday price movement.
Price never moves in a straight line. Even in a clean trend it wobbles back and forth. If your stop sits inside that wobble, it can be hit while your idea is still perfectly right.
Meet ATR
Average true range (ATR) is the typical size of one candle on your timeframe, including any gaps. If the 5 minute ATR on gold is $4, then an average 5 minute candle covers about $4 from high to low.
A $2 stop on that chart is half a normal candle. Ordinary movement can reach it in minutes.
A simple guide
The checker compares your stop distance with ATR on the timeframe you're trading:
| Stop distance | What it means |
|---|---|
| Under 0.8x ATR | Inside normal noise, likely to be hit by chance |
| 0.8x to 1x | Tight |
| 1x to 3x | Outside normal noise |
| Over 3x | Wide, so your position will be small |
These are guides, not laws. A stop also needs to sit beyond the level that proves your idea wrong.
Wider stop, same risk
A wider stop doesn't mean more risk if you shrink your lot size to match. Risking 1% with a $6 stop simply means fewer lots than risking 1% with a $3 stop.
Key points
- ATR tells you how much price normally moves per candle.
- Stops under about 1x ATR get clipped by noise.
- Adjust lot size, not risk, when you widen a stop.
Related terms
- ATR
- Average true range: the typical size of one candle, including gaps.
- Volatility
- How much and how quickly price moves.