ATR (Average True Range)

ATR (Average True Range) measures market volatility by calculating the average of true ranges over a specified period, typically 14. True range is the greatest of: current high minus current low, absolute value of current high minus previous close, or absolute value of current low minus previous close. This construction captures gaps and overnight moves that a simple high-low range would miss, giving a more accurate volatility picture.

ATR is one of the most practical indicators for position sizing and stop loss placement. A pair with a 14-day ATR of 80 pips is structurally more volatile than one with a 40 pip ATR, and stops must respect that difference to avoid getting shaken out by normal fluctuations. Many professional traders size positions so that a stop placed at 1.5 to 2 times ATR risks a consistent percentage of account. This automatically normalizes risk across pairs with different volatility profiles, keeping dollar risk steady even when pip distances vary substantially.

For example, if GBP/JPY has an ATR of 150 pips and you are trading a standard lot where each pip is worth about $10, placing a stop at 2 times ATR (300 pips) creates $3,000 of risk per trade. If your account is $100,000 and you want to risk 1 percent ($1,000) per trade, the correct position size is 0.33 lots, scaled down from the full standard lot to match your risk rules. ATR gives you the math to size trades properly for each pair.

In copy trading, ATR informs position sizing and stop placement within the master strategy. SteadyFlowFX's 9 algorithms use volatility-adjusted logic across the 8 currency pairs so that trade risk scales to current market conditions rather than using fixed pip amounts. Understanding ATR helps subscribers see why stop losses vary in size across different trades — they are calibrated to volatility, not arbitrary.