Confused on true ATR for position sizing on dailies

asked by u/ishaan_shah · 3d · 3 answers

Still trying to get my head around proper position sizing. I get the ATR concept for volatility, but when I'm looking at, say, $SPY on a daily chart, the ATR is a dollar value. How do you translate that dollar value into shares or contracts for a specific risk per trade? My broker's calculator just asks for a percentage stop, which isn't the same. Am I overthinking the raw ATR number or is there a step I'm missing to connect it to my account size for actual shares?

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Top answers

  • u/lukanagy· 4 pts· 2d

    You're definitely not overthinking it; that's the core of translating volatility into a practical position size. The dollar ATR tells you the typical daily range, and you use that, along with your risk per trade (e.g., 1% of your account), to calculate how many shares you can afford for that move. Your broker's percentage stop is usually based on price, not volatility, which is a key distinction.

  • u/fengliu· 1 pts· 2d

    You're not overthinking. The ATR value is your volatility measure. To size, you'd use that dollar value, your desired risk per trade (e.g., 1% of account), and then calculate shares from there. Your broker's calculator likely assumes a fixed dollar stop, not one based on ATR.

  • u/emilio_s· 0 pts· 2d

    This is exactly what I'm struggling with too! I get the concept of using ATR to define a stop, but then turning that into an actual share count that respects a risk percentage is where I get lost. Are most people doing manual calculations every time, or is there a tool I'm missing?

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