Size the stop to volatility, not to a round percentage
A 2% stop applied to every position treats a large-cap bank that moves 0.8% on a normal day and a small-cap chemical name that moves 4% as if they behave the same way. They do not. On the first, 2% is a genuine change in behaviour worth respecting. On the second, 2% is Tuesday — the stop will be taken out by ordinary noise before the trade has had any chance to be right or wrong.
Average True Range fixes this by measuring, in rupees, the typical size of a daily bar including overnight gaps. Set the stop at a multiple of ATR and it sits outside the instrument's normal movement by construction, whatever that instrument happens to be. The same rule then produces a tight stop on a quiet stock and a wide one on a volatile stock without you having to judge each case.
How to use this calculator
- Enter your intended entry priceThe level you expect to actually get filled at, not the current last-traded price if you are working a limit order some distance away.
- Read the daily ATR off the chart, in rupeesAdd the ATR(14) indicator to a daily chart on your broker platform and read the current value. It is quoted in the price unit, so a ₹1,450 stock with ATR 32 moves about ₹32 on an average day.
- Choose an ATR multipleRoughly 1.5 to 2 for swing trades held days to weeks, 0.5 to 1 for intraday. Larger multiples survive more noise and cost more per unit of size.
- Set the directionLONG places the stop below entry, SHORT places it above. Everything else, including the targets, flips accordingly.
Choosing the ATR multiple
| Holding period | Typical multiple | What you are trading off |
|---|---|---|
| Intraday | 0.5 to 1× daily ATR | Tight enough that a day trade has usable reward relative to risk, loose enough to survive a single adverse swing. |
| Swing, several days | 1.5 to 2× daily ATR | The common default. Survives normal pullbacks within a move without giving back the whole trade. |
| Position, weeks to months | 2.5 to 4× daily ATR | Sits outside almost all noise. Requires a much smaller position for the same rupee risk. |
There is no correct multiple, only a trade-off you are making explicitly instead of accidentally. A tighter stop means a larger position for the same rupee risk and a lower probability of the trade surviving to its target. A wider stop means a smaller position and more room to be right slowly. Both can work; mixing them at random cannot.
Trail stops automatically on live positions
AIVITTA monitors your open trades tick by tick, trails stops as price moves in your favour and alerts you when a level is breached.
Reading the 1R, 2R and 3R targets
One R is your stop distance — the amount you lose per share if the stop is hit. Expressing targets in R rather than rupees or percentages is what makes results comparable across trades of different sizes and different instruments. A 3R winner on a ₹40 stock and a 3R winner on a ₹4,000 stock are the same achievement.
It also makes the arithmetic of an edge visible. A strategy that wins only 40% of the time is comfortably profitable if the winners average 2R and the losers stop at 1R: forty wins at 2R against sixty losses at 1R nets +20R over a hundred trades. A strategy that wins 70% of the time loses money if the losers are allowed to run to 2R while the winners are taken at 0.5R. Hit rate on its own tells you almost nothing. The R-multiple glossary entry covers this properly, and ATR covers the indicator.
Where ATR stops fail
- Gaps. ATR includes overnight gaps in its calculation, but a stop order still cannot protect you against one. On a large gap through your level the fill is wherever the market opens.
- Regime changes. ATR is a trailing average, typically over 14 days. After a volatility shock it understates current risk for days, so stops computed from it are too tight exactly when they need to be widest.
- Illiquid names. In a thin counter the spread and the impact cost can be a meaningful fraction of ATR, so the effective stop is worse than the calculated one. Check delivery volumes before trusting a tight ATR stop.
- Events. Results, policy announcements and index rebalancing produce moves that have nothing to do with recent average range. Either be flat through them or size for the gap, not for the ATR.
- Placing the stop at an obvious round number. A round-number stop and an ATR stop can happen to coincide; when they do, expect the level to be tested.
From stop to position size
The stop is only half of a risk decision. Once you know the stop distance in rupees, the position size calculator turns it into a quantity: your rupee risk budget divided by the per-share risk. Do it in that order every time — stop first, size second — and the loss on any single trade becomes a number you chose rather than a number you discover. For the wider context, how to set a stop-loss covers structure-based alternatives to ATR, and F&O risk management covers what changes when leverage is involved.