Stop Loss Types Explained: ATR vs Pips vs Percent

The stop loss is the single most important number in a strategy. It defines where you are wrong and caps the cost of being wrong. Setup.Cash supports three stop types plus trailing. Here is how to choose.

ATR-Based Stops

An ATR stop places your exit a multiple of Average True Range away from entry (e.g., 1.5× ATR). Because ATR measures recent volatility, the stop adapts: wider when the market is choppy, tighter when it is calm.

• Best for: most strategies, especially across changing conditions or multiple instruments.
• Why: it normalizes risk to volatility, so a 1.5× ATR stop means roughly the same "room" in any regime.

Fixed-Pip Stops

A pip stop is a constant distance (e.g., 20 pips). Simple and predictable.

• Best for: stable instruments and intraday setups where you know the typical noise.
• Watch out: a fixed pip stop is too tight in volatile sessions and too loose in quiet ones.

Percentage Stops

A percent stop exits at a fixed percentage from entry (e.g., 0.5%). Useful when you think in percentage terms — common for crypto and stocks.

• Best for: assets that move in percentage terms more than absolute terms.

Trailing Stops

A trailing stop follows price as the trade moves in your favor, locking in gains. Setup.Cash supports ATR or pip trailing. Use it when you want to ride trends but protect profit — just know it can exit early in choppy markets.

How the Stop Drives Position Size

Whatever stop you pick, let it determine position size. Decide your risk per trade first (say 1%), then size the position so that hitting the stop loses exactly that amount. This keeps risk consistent even as the stop distance changes with volatility. See the risk management guide.

A Practical Default

If you are unsure, start with an ATR stop at 1.5× and a 2R take profit. Backtest it, then adjust the multiple based on how often you get stopped out versus how often winners run. The goal is a stop that is wide enough to survive normal noise but tight enough to keep losses small.

Set It in the Risk Node

In the builder, the risk node holds the stop type and value. Configure it before you run, and confirm the behavior in a backtest — pay attention to your average loss and worst loss, not just the win rate.

A good stop will not win trades for you. But a disciplined, volatility-aware stop is what keeps you in the game long enough for your edge to play out.