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IntermediateStock Alerts + Tools0:45Indicators

The Only Indicator That Sets Your Stop

ATR has no opinion about direction, which is exactly why it is the right tool for sizing a stop and a position.

0:45 · 6 scenes

This lesson is part of a Stock Alerts + Tools plan.

What the lesson covers

  1. 0:00Average True Range says nothing about direction. That is its advantage.
  2. 0:05What true range fixes. It measures the full bar including the gap, so an overnight move is not ignored.
  3. 0:14Why a fixed stop fails. A two percent stop is loose on a quiet name and inside the noise on a fast one.
  4. 0:23The fix. Place the stop a multiple of ATR away, so the distance follows the security's own noise.
  5. 0:32Then size from it. Once the stop distance is set, position size is arithmetic: risk divided by distance.
  6. 0:40Let the security's own volatility decide how far away the stop belongs.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
The Only Indicator That Sets Your Stop — MAD Academy Training Video · MadStockAlerts