Volatility Stop: an ATR trail that flips direction

What it measures

A volatility stop trails a level an ATR multiple away from price, ratcheting toward it and never away, and flips to the other side when price closes through it.

It is the same family as SuperTrend and Chandelier Exit — all three are ATR trails — and differs in what it anchors to: this one follows the close directly rather than a band midpoint or a lookback extreme.

That makes it the most responsive of the three, and the most prone to being taken out by a single sharp bar.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute ATR over the period and multiply by the factor to get the offset.

2. 2

   While long, the stop is the highest value of close minus offset seen so far in this leg.

3. 3

   When the close falls below the stop, flip: the stop becomes close plus offset and the direction reverses.

4. 4

   While short, mirror the logic, taking the lowest close plus offset.

Settings

A twenty-period ATR with a multiplier around two is a reasonable starting point. On crypto, multipliers below two produce a stop that ordinary noise will hit; above three it stops being a stop and becomes a slow trend filter.

How to read it

• The line is an invalidation level, not a target. Price reaching it means the premise of the current leg has failed.
• The distance from price is a live measure of how much volatility the position is being given room for.
• Frequent flips mean the multiplier is too tight for the instrument, not that the market is unreadable.

Where it misleads

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