An Elastic Volatility Stop Based on ATR and Recent Price Extremes

Summary

This post describes a converted version of an Ensign volatility stop. It scales an average true range measure by a parameter and combines it with rolling highs and lows to create candidate stop lines: below price for long positions and above price for short positions. Price movement beyond those lines, or intervening conditions based on which directional trigger occurred most recently, determines whether the corresponding line is updated. The author presents the stop’s adjustable elasticity as a way to tolerate small pullbacks during an existing trend.

The post includes implementation logic and discusses practical shortcomings rather than trading results. The author reports that chart calculation is very slow and that the plotting workaround hides inactive lines using background-matching colors because a no-plot value was not found. No parameter study, backtest, or comparison with other stop methods is provided. The described behavior and code are therefore a technical proposal, not evidence that the stop improves entries, exits, or risk-adjusted returns.

Key ideas

• The stop scales average true range by a configurable factor to set its distance from recent price extremes.
• Separate candidate lines are formed for long and short positions using rolling highs and lows.
• Directional triggers and the more recent trigger help determine which stop line is active.
• The author argues that adjustable elasticity may reduce premature exits during modest pullbacks.
• The conversion is reported to calculate slowly and uses color settings to conceal inactive plots.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.