speed
Momentum with ATR
Trade momentum with volatility-based position sizing
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What Is This Strategy?
This strategy combines momentum indicators with ATR (Average True Range) for position sizing and stop-loss placement. ATR measures volatility, helping size positions appropriately for risk management.
How It Works
- Identify momentum using rate of change or momentum indicators
- Calculate ATR to measure current volatility
- Set stop-loss at a multiple of ATR (e.g., 2x ATR)
- Size positions based on ATR to normalize risk
- Enter on momentum confirmation, exit on momentum loss or stop
Key Parameters
Momentum Period
Lookback for momentum calculation
ATR Period
Period for ATR calculation
ATR Multiplier
Stop-loss distance in ATRs
When to Use
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Best For
- • Strong trending conditions
- • Volatile stocks
- • When precise risk management is needed
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Avoid When
- • Low volatility conditions
- • Choppy markets
- • Range-bound trading
Risks & Limitations
warning
Be Aware
- • Momentum can reverse quickly
- • Wide stops in high volatility can mean larger losses
- • May miss moves if entry criteria too strict
Example Trade
Scenario
AMD shows 15% momentum over 14 days with ATR of $3. Stop set at 2x ATR = $6.
BUY
Reasoning
Strong momentum with clearly defined risk. Position sized so $6 stop = 2% account risk.
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