I always thought the market knew where my stops were and that I was being ‘stop hunted’ by the big banks and other traders.
But that simply isn’t true.
Especially for us that trade CFDs.
Although I used to blame these institutions, the blame was solely on me and my misunderstanding or risk and trade management. I never accounted for the market volatility when it came to adding a stop loss. My mistake.
Using an indicator to be on top of the market volatility changed my performance completely, it might help you too.
What is an ATR anyway?
ATR doesn’t tell you which way the market is going. Instead, it tells you how much a market typically moves (its volatility). The higher the ATR, the more “wiggle room” you need to give your trades.
The Hack in Action
If you’re going long, set your stop 1 ATR below the most recent swing low.
If you’re going short, set your stop 1 ATR above the most recent swing high.
This way, your stop is tucked away from normal noise, you’re only out if the market truly reverses against you.
By the way this works for all timeframes, even you guys that trade the minute timeframe.
Think About It
Imagine you’re trading EUR/USD at 1.1000.
The ATR (14) is showing 25 pips. Which means on average over the past 14 periods the movement has been around 25 pips.
You spot a bullish setup and go long, with the last swing low at 1.0980.
Instead of putting your stop right at 1.0980, you go 1 ATR below. 1.0980 – 0.0025 = 1.0955 stop loss.
If EUR/USD just dips to retest the low, you’re still in the trade. But if it truly breaks down, you’re protected.
Why It Works
Keeps you safe from normal volatility.
Filters out false stops caused by random spikes.
Adds consistency to your risk management.
If you get stopped, it usually means the trade idea wasn’t valid anyway.
Before implementing this straight away, go through the past 20 trades. Have a look at the ATR and your original stop. Monitor the difference between the ATR stop and your normal stop. If you find the ATR keeps you in the trade then it’s for you. If not, well maybe have a think about something else.