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Volatility-Adjusted Risk

Shrinks size when ATR expands

Traders often mention getting chopped or blown out when the volatility regime changes. This recipe detects volatility expansion and automatically recommends smaller size or wider stops with fixed risk.

House RecipePersonal7 min setup

INGREDIENTS

🔔Notifications

PROMPT

Create "Volatility-Adjusted Risk". Detect ATR expansion (ATR14 >= 1.5x 20-day baseline). When triggered, recommend risk-per-trade reduced to 70% baseline and tag the session "high-vol".

Pain point

A strategy that works in "normal" volatility often fails when range expands.

Triggers

  • ATR today >= atrExpansionMultiplier * ATR baseline
  • OR intraday range exceeds rangeMultiplier * averageRange

Conditions

  • Applies per-instrument
  • Baseline computed over lookbackDays

Actions

  • Suggest reducing risk-per-trade by riskReductionMultiplier
  • Alternatively: keep risk constant but reduce size because stop distance expands
  • Add session tag: "high-vol"

Parameters (defaults)

  • atrLength: 14
  • lookbackDays: 20
  • atrExpansionMultiplier: 1.5
  • riskReductionMultiplier: 0.7

Examples

  • If ATR is 1.6x the 20-day baseline, reduce risk per trade by 30% for the session.
  • If range is extreme, suggest "one trade max" mode for the day.
Tags:#trading#volatility#risk-management#regime