Name: Average True Range
Author: Dean Cross

Where to Put a Stop Loss, How Much to Risk, and When to Let a Trade Run — Technical Analysis for Stocks and Swing Trading, Tested on 36 Years of Market Data

Every trade needs a stop. Where should it go?

Put a stop too close, and an ordinary day knocks you out of a trade that was right. Put it too far, and a small loss becomes a large one. Most traders pick a round number, 5% or 8%, and use it on every stock.

Average True Range measures how far a stock really moves on an ordinary day. Traders use it to set stops, size positions, trail winners, and judge whether a market is calm or wild, and almost every one of those uses comes with a rule of thumb. This book tests them on every S&P 500 stock since 1990, about 4.6 million stock-days, with delisted companies included and dividends and costs counted.

Some of the answers confirm what traders are taught. Some will surprise you, and a few may change how you trade. Every chapter shows the numbers, uses real stocks on real dates, and ends with a routine you can put to work on your next trade.

It's written in plain English for traders who want evidence, not opinions. No background in statistics is needed.

Questions this book tests

How many ATRs away a stop should sit, and whether an ATR stop really beats a fixed percentage
How often a stock makes a move several times its normal size, and what an overnight gap does to a stop
Whether to widen your stops when the market falls hard
Whether a trailing stop really lets profits run, and whether targets at two or three ATRs help
How much to risk on each trade, and whether the popular 1% rule is right for you
Whether good exits and position sizing can rescue random stock picks
How far a stock is likely to travel before an option expires

Tested on about 4.6 million stock-days, with delisted companies included and dividends and costs counted.