...and would you mind explaining to us how this is done with an example or two? Because AFAIK, traders use ATR to check whether SLs are outside volatility bands, not to actually size their positions. The SL should be used for that.
I first read about using ATR for position sizing in Mark Conway's book Professional Stock Trading. It's alright I guess, but I'm not personally that fond of range controls. I may remember this a little off, but basically instead of using Price - Exit, you use the range for the last X bars as the divisor for your risk amount. I think Conway used around 20 bars but it really depends on your timeframe. So that is Average True Range for the stock. The more volatile, the less you buy. The less volatile, you own a lot. If that's what you want, then ATR will do it for you. Personally, I don't have any good systems that use that kind of entry technique. Enjoy, Damien