The stop sized to the instrument's range, not a round number

A stop's job is to be hit only when the idea is wrong. A stop inside the instrument's ordinary daily wander is hit when nothing is wrong at all - it is a donation with paperwork.

Range is a property of the instrument

Crude routinely travels more in a session than some markets manage in a month, and gas makes crude look sedate. The seed of every bad commodity stop is imported intuition: a distance that felt generous on a currency pair is inside the hourly noise of a commodity. The instrument's measured range - ATR is the workhorse - is the only defensible starting point, scaled by a multiplier that reflects how much ordinary wander the idea is prepared to sit through.

Round numbers are decoration

A stop at $80 because $80 is round, or one dollar away because dollars are tidy, encodes no information about the market. Worse, module 2 taught you the continuous chart's old levels can be splice artefacts - a 'support' that nobody ever traded is a particularly hollow place to park a stop. Range-based placement asks the only question that matters: how far does this instrument move when nothing is happening, and how much further before something demonstrably is?

The range changes, and the stop must

• Commodity volatility is regime-shaped: a calm month and a supply-shock month are different instruments wearing the same symbol.
• A stop distance set in the calm regime and reused in the loud one is inside the noise again - the ATR moved and the stop did not.
• Wider stop, same budget, means fewer contracts. The size absorbs the regime; the risk number never does.

Work the numbers below: an ATR, a multiplier, a distance, and what that distance does to cash at risk. Then hand the distance to lesson 2's arithmetic - which is the whole system, joined.