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https://www.tradingview.com/script/JGUm6iDJ-THT-ATR-Trailing-Stop/

THT Average True Range (ATR) Stop Loss — Standard Operating Procedure

Objective:

To teach traders what the ATR is, why it’s more effective than a fixed-dollar or fixed-percentage stop, and how to use the THT ATR Stop Loss indicator to manage risk and scale out during large market moves.

1. What is the Average True Range (ATR)?

• Definition: ATR measures how much a stock moves on average per candle over a given period, factoring in both intraday movement and overnight gaps.
• What it Tells You: ATR is a direct measure of volatility — the “breathing room” a stock needs to move without prematurely hitting your stop.
  • Why it Matters:Every stock has its own volatility personality.
  • A $2 stop might be reasonable for AAPL, but meaningless for a $400 stock like TSLA.
  • ATR adapts to the stock’s natural movement, so your stops fit the asset, not an arbitrary number.

2. Why ATR Beats Pre-Defined Stops

Fixed Stops = One Size Fits None

• If you place the same $ stop or % stop on every stock, you risk:
  • Getting stopped out too early on volatile names
  • Using unnecessarily wide stops on slower movers

ATR Stops = Volatility-Adjusted

• ATR stops move with the stock’s volatility.
• You’re not guessing — you’re letting the market dictate the right amount of breathing room.

3. THT ATR Stop Loss Formula

• We take the current ATR value and multiply it by 2.5.
• This gives us a buffer zone beyond normal price swings.
• Result: Price has to truly reverse before triggering the stop, rather than just wicking you out.

4. How to Use in the THT System

Important: This is not an entry/exit signal by itself.

It’s a risk management and scale-out tool — especially useful during breakouts.

A. Managing Risk in a Breakout

• In a strong move, ATR stop trails the price at a volatility-adjusted distance.
• Prevents you from exiting too soon while still locking in gains.
• If price collapses through ATR stop, momentum has likely shifted.

B. Scaling Out

• If price is extended far above the ATR stop during a breakout:
  • Take partial profits at your targets (SMZ/Fib levels, Volume Profile resistances)
  • Use ATR stop as a “line in the sand” for remaining position

C. Volatility Context

• If ATR is widening, volatility is increasing — be ready for sharper pullbacks.
• If ATR is shrinking, market may be entering consolidation.

5. Common Mistakes to Avoid

• Using ATR Stop for Every Trade Exit: This will keep you in losing trades too long if momentum fails early. Use in combination with BX Trender, SMZ, and structure.
• Setting Multiplier Too Low: You’ll get stopped out on normal volatility noise.
• Ignoring Macro Levels: ATR stops don’t replace major SMZ or volume profile support/resistance.

6. Quick Workflow Checklist

During Trade:

• [ ] Use ATR stop to trail during strong momentum moves
• [ ] Scale partials at major resistance before ATR stop gets hit

After Trade:

• [ ] Review whether ATR stop kept you in trend or stopped you out too early — adjust multiplier if needed

7. Key Edge

The THT ATR Stop Loss adapts to each stock’s volatility, keeping you in strong trends longer and preventing arbitrary stop placement. It’s not just a safety net — it’s a dynamic risk management tool designed to work hand-in-hand with SMZ, Volume Profile, and BX Trender.