For Business

Risk & Money Management

Fixed Stop vs Volatility Stop

A fixed stop is a distance that never changes; a volatility stop is a multiple of how far the market has been moving lately, so it widens in a wild month and narrows in a quiet one. This paper shows you the two on two real days of the euro against the dollar — a 25-pip fixed stop, and one and a half times a typical day of 126 pips in April 2025 and 55 in December; the idea as a ruler and a tape measure; the typical day drawn under the price through the year; the size each stop gives at the same 100 dollars; and the points box in the Modify Order window on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Two stops on two days

There are two ways to set the distance of a stop, and the difference shows on two real days. On 10 April 2025 the euro's typical day — the average true range over fourteen days, how far it usually moves in a day — was 125.6 pips, and that day ran 299 pips from top to bottom. On 17 December 2025 the typical day was 54.9 pips, and the day ran 55. A fixed stop is a distance, 25 pips here as an example, and it is the same on both days. A volatility stop is a multiple of the typical day, one and a half times it here: 188 pips in April, 82 in December. Same rule, two very different distances.

A ruler and a tape measure

Picture a ruler and a tape measure. The ruler is always the same length; it measures every room with the same stick. The tape is pulled out to the job, further in a bigger room, and rolled back for a smaller one. A fixed stop is the ruler: 25 pips whatever the day. A volatility stop is the tape: a multiple of how far the market has been moving lately, pulled out to 188 pips in a 126-pip-a-day April and rolled back to 82 in a 55-pip-a-day December. Neither is the better tool. One gives the same distance every day; the other gives the same share of a day, every day.

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