Determining your stop level on a trade is one (1) of the most important elements of entering a trade. While we all develop our own way of determining a stop level I believe it is important to have a non-biased way of determining your level.
An extremely common and effective way of determining a stop level is by the use of the Average True Range. The Average True Range (ATR) simply determines the degree of price volatility of a period of days.
ATR Stop Level - MetaStock Formula (Indicator Builder)
“Close - (X * ATR( Y ))”
X = Multiplier (typically 5 or 7)
Y = average true range of a number of days (typically 14 days)
C-(5*ATR(14))
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