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Risk3 min read · updated 7/18/2026

How ATR-based stops and targets work

A stop-loss placed a fixed number of dollars away ignores the single most important thing about a market: how much it moves. In a quiet market that stop is too far; in a volatile one it's too tight and gets clipped by normal noise.

What ATR measures

Average True Range (ATR) is the average size of a candle's range over the last 14 periods, a direct measure of current volatility. When the market is calm, ATR is small; when it's wild, ATR expands.

How LazyChart uses it

Every signal places the stop-loss 1.5× ATR from entry and the take-profit 3× ATR away. That gives a consistent 1:2 risk-to-reward ratio that automatically widens in volatile conditions and tightens in quiet ones, the stop sits beyond normal noise but no further.

Why 1:2

With a 1:2 ratio you can be wrong more often than right and still come out ahead: winning trades return twice what losing trades cost. It doesn't make a strategy profitable on its own, but it means the maths isn't working against you from the start.

Educational content only, nothing here is financial advice, and no strategy or concept guarantees a profitable outcome. Trading involves substantial risk of loss.

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