Atr Position Size Calculator
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Reviewed by Calculator Editorial Team
Determine your optimal position size using the Average True Range (ATR) indicator, a key technical analysis tool for forex and trading. This calculator helps you calculate how much capital to risk per trade based on your account size and the ATR value.
What is ATR?
The Average True Range (ATR) is a technical analysis indicator that measures market volatility. It helps traders determine the optimal position size by providing a standardized measure of price movement.
ATR is calculated as the average of the true ranges over a specified period. The true range is the greatest of the following:
- Current high minus current low
- Absolute value of current high minus previous close
- Absolute value of current low minus previous close
ATR Formula:
ATR = (True Range 1 + True Range 2 + ... + True Range n) / n
ATR is typically calculated over 14 periods, but traders can adjust this period based on their trading style and market conditions.
How to Use This Calculator
To determine your optimal position size using ATR:
- Enter your account balance
- Input the ATR value from your trading platform
- Specify your risk tolerance (typically 1-3%)
- Click "Calculate" to see your recommended position size
Note: This calculator assumes you're using a 1:1 risk-reward ratio. Adjust your position size based on your specific trading strategy.
The Formula
The position size calculation uses this formula:
Position Size Formula:
Position Size = (Account Balance × Risk Percentage) / ATR
Where:
- Account Balance = Total funds in your trading account
- Risk Percentage = Percentage of account you're willing to risk per trade (expressed as decimal)
- ATR = Average True Range value from your trading platform
Worked Example
Let's say you have a $10,000 account, the ATR is 0.005 (5 pips), and you want to risk 1% of your account per trade.
Using the formula:
Position Size = ($10,000 × 0.01) / 0.005 = $2,000
This means you should risk $2,000 per trade with this setup.
| Parameter | Value |
|---|---|
| Account Balance | $10,000 |
| Risk Percentage | 1% |
| ATR | 0.005 |
| Position Size | $2,000 |
Frequently Asked Questions
- What is a good ATR value?
- A good ATR value depends on your trading style and market conditions. Higher ATR values indicate more volatile markets where you might want to use smaller position sizes.
- How often should I recalculate my position size?
- You should recalculate your position size whenever your account balance changes significantly or when market conditions change, which may affect the ATR value.
- Can I use ATR for all trading instruments?
- Yes, ATR can be used for any trading instrument, but the optimal position size may vary depending on the instrument's volatility and your risk tolerance.
- What if my ATR value is very low?
- A very low ATR value may indicate a range-bound market. You can use this information to adjust your position size accordingly, potentially taking larger positions in such conditions.
- How does ATR compare to other volatility measures?
- ATR is one of several volatility measures, including standard deviation and Bollinger Bands. ATR is particularly useful because it accounts for gaps in the price action that other measures might miss.