How to use the stop-loss calculator
The calculator has two tools.
Percent / amount places the stop by a fixed rule:
- Choose long or short. A long stop sits below the entry; a short stop sits above it.
- Choose how to set the stop: a percentage from the entry, or the most money you are willing to lose on the whole position.
- Enter the entry price and the number of shares. Add your account balance to see the loss as a share of the account.
ATR stop places the stop according to how much the stock usually moves:
- Enter the entry price and the ATR. Most charting platforms show the Average True Range as an indicator; the 14-period daily ATR is the standard setting. Use the value in dollars.
- Choose a multiple, typically 1.5 to 3.
- Enter the money you are willing to risk. The calculator sizes the position so that hitting the stop costs that amount.
The formulas
Dollar stop (long) = Entry − Dollar risk ÷ Shares
Loss if hit = |Entry − Stop| × SharesFor a short position the stop is above the entry: Entry × (1 + Stop %) or Entry + Dollar risk ÷ Shares.
Shares = Money to risk ÷ (Multiple × ATR), rounded downFor a short position, add the multiple of the ATR to the entry instead.
A worked example
You buy 200 shares at $64.20 and decide to exit if the stock falls 7%. The stop goes at $59.71, $4.49 per share below the entry. If it is hit you lose $898.80, which is 3.60% of a $25,000 account.
If you would rather cap the loss at $500, the stop moves up to $61.70, a 3.89% distance.
With the ATR method, the stock’s 14-day ATR is $1.85, or 2.88% of the price. A 2 × ATR stop sits $3.70 below the entry, at $60.50. To risk $500 with that room, you buy 135 shares.
What the ATR measures
The Average True Range was introduced by J. Welles Wilder. Each day’s true range is the largest of three distances: today’s high minus today’s low, today’s high minus yesterday’s close, and yesterday’s close minus today’s low. Including yesterday’s close means overnight gaps count as movement.
ATRtoday = (ATRyesterday × 13 + True rangetoday) ÷ 14Wilder's smoothing over 14 periods. Some platforms use a simple 14-day average of the true range instead, which gives slightly different values.
The point of an ATR stop is to place the exit beyond the stock’s normal noise. If a stock routinely swings $1.85 in a day, a stop $2.50 away is barely more than one day’s movement and will often be hit by ordinary fluctuation, even when the trade idea is still sound.
Wider stops, smaller positions
The ATR multiple and the position size pull against each other. With the same $500 at risk:
| ATR multiple | Stop price | Distance | Shares | Position value |
|---|---|---|---|---|
| 1.5× | $61.43 | 4.32% | 180 shares | $11,556.00 |
| 2× | $60.50 | 5.76% | 135 shares | $8,667.00 |
| 3× | $58.65 | 8.64% | 90 shares | $5,778.00 |
The loss if the stop is hit is about the same in every row. What changes is how often the stop is hit and how much stock you hold. That is why the stop should be chosen first, from the chart or the volatility, and the position size worked out from it. The position size calculator does the sizing for any stop.
Percentage stops: simple but blind to volatility
A fixed percentage is easy to apply and is the basis of well-known rules such as cutting any loss at 7% to 8% below the purchase price. Its weakness is that it treats every stock alike. On the example position, a 3% stop sits at $62.27 and a 10% stop at $57.78; for this stock, whose ATR is 2.88% of the price, the 3% stop is roughly one normal day away.
A short position mirrors everything. Selling 300 shares short at $40 with a 5% stop puts the stop at $42.00, and hitting it costs $600.00.
Where traders place stops
- Beyond structure. Below a recent swing low or support level for longs, above resistance for shorts, often with a small buffer.
- Beyond noise. At least one to two ATRs away, so a normal day does not stop you out.
- Not at round numbers. Many orders cluster at prices like $60.00; a stop slightly beyond the cluster is less likely to be swept by a brief spike.
Once the trade moves in your favor, a trailing stop can follow the price up and lock in part of the gain.
What this calculator does not include
- Gaps. A stop does not protect against a price that opens beyond it. Earnings reports and overnight news are the usual cause.
- Commissions and slippage, which add to the loss.
- Calculating the ATR. The calculator takes the ATR as an input; read it from your charting platform, using the same timeframe as your trade.
- Changing volatility. The ATR at entry may differ from the ATR a week later; the stop does not adjust unless you move it.