# Lesson 06 — Slide Deck

**Source article:** `/learn/stop-loss-math-that-survives-gaps.html` (existing standalone, retrofitted with ATR ladder SVG + gap impact simulator widget for the curriculum slot)
**Target length:** 13 slides · ~6 min talk track
**Same brand specs as lessons 01–05 decks**

---

## Slide 1 — Title

**On-slide:**
> ◆ THE SWING DECK LEARN
> # Stop-loss math that survives gaps.
> Beginner Track · Lesson 06 / 12 · Risk math

**Speaker:** The stop you set on Friday isn't the stop you get on Monday's open. A 2× ATR stop is a 2× ATR stop only when the market is continuously trading. After earnings, after a guidance cut, after a CEO resignation — you get whatever fill the gap hands you. The discipline isn't the stop value. It's understanding what the stop is actually doing.

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## Slide 2 — Friday's stop, Monday's print

**Visual:** A two-day chart with Friday close marked and Monday's open gapped down 5% below Friday's close. A "stop $96" line crossed by the gap with no fill in between.

**On-slide:**
> Friday close: $100. Stop set at $96 (2× ATR).
> Monday open: $90.
> Stop fills at $90 — not $96.

**Speaker:** Here's the picture. You set a stop at ninety-six on Friday. The stock has a two-dollar daily ATR, you size the position for one percent of account. Done, you walk away. Saturday, the company announces a guidance cut. Monday opens at ninety. Your stop becomes a market order, fills at ninety. Loss is shares times ten dollars, not shares times four dollars. The stop didn't fail. The continuous-market assumption did.

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## Slide 3 — What an ATR stop assumes

**Visual:** Two side-by-side strips: continuous trading (smooth line) and gap (jagged break). Caption underlines the difference.

**On-slide:**
> ATR stop assumes:
> · Market is open
> · Liquidity at every cent
> · Slippage measured in pennies
>
> None of those hold across a closed market.

**Speaker:** Average True Range is a fourteen-day measure of typical *daily* volatility. A 2× ATR stop says "exit when price moves twice the typical daily range against me." Clean rule when the market is open — the broker fills your stop close to where you set it, slippage in pennies. Across sixty-four hours of closed market — Friday close to Monday open — none of those assumptions hold. The underlying business keeps generating news; the ticker can't reprice; the next print is wherever buyers and sellers agree at the bell.

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## Slide 4 — The ATR ladder

**Visual:** The article's ATR ladder SVG, polished. Five horizontal lines descending from entry, color-coded by zone (green at 2×, blue at 3×, amber at 4×, red at 5×).

**On-slide:**
> | Distance | Role |
> |---|---|
> | 1× ATR | too tight — noise zone |
> | 2× ATR | typical sizing stop |
> | 3× ATR | Chandelier Exit cushion |
> | 4× ATR | minor catalyst gap |
> | 5× ATR | earnings gap zone |

**Speaker:** The geometry of stop distances. One-times ATR is the noise zone — gets shaken out by routine intraday volatility. Two-times is the typical sizing stop. Three-times is the trailing-stop cushion. Four-times is where minor catalyst gaps land. Five-times and beyond is the earnings/CEO-resignation/regulator-investigation zone. ATR averages a fourteen-day range; it does not predict where the discrete-event tail lands.

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## Slide 5 — Gap distribution

**Visual:** A histogram of overnight moves. Skinny body around zero, fat right tail at 3-8× ATR labeled "earnings nights." Annotation: "ATR averages this. ATR doesn't predict it."

**On-slide:**
> 80%+ of overnight gaps: under 1× ATR.
> Earnings night: 3–8× ATR is normal.
> Bad-guidance night: 5× ATR or more.
>
> The distribution isn't normal. It has a fat right tail.

**Speaker:** Most overnight gaps in liquid US equities are small — eighty-plus percent are within roughly one-times ATR. The thing that matters isn't the median. It's the shape of the right tail. On a normal night, the open is within a fraction of an ATR of yesterday's close. On an earnings night, three to eight times is routine. Stocks that miss guidance can open down fifteen to thirty percent — five-times ATR or more for most names. The distribution of overnight moves isn't normal. ATR averages it out. It doesn't predict the tail.

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## Slide 6 — Two stops, two jobs

**Visual:** Two columns. Left "Capital protection" (structural support, thesis-invalidation level). Right "Position sizing" (the input to the share-count formula).

**On-slide:**
> Capital-protection stop: structural, where the thesis is broken
> Position-sizing stop: the input to (account × risk%) ÷ stop = shares
>
> Same number used for both = the trap.

**Speaker:** Here's where most retail discussions go wrong. They conflate two distinct things. The capital-protection stop is the line below which the thesis is broken — set at structural support, not derived from ATR. The position-sizing stop is the input to the share-count formula. A tighter sizing stop means a larger position. They serve different purposes, and they're often at different prices. The trap is using the same number for both.

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## Slide 7 — The catastrophe example

**Visual:** The widget mockup or a step-by-step walkthrough. $100 stock, $2 ATR, 2× stop at $96, sized for 1% on $100K → 500 shares. Earnings night opens at $90. Loss = $5,000 = 5× the budget.

**On-slide:**
> $100 stock · $2 ATR · 2× stop at $96
> 500 shares (sized for $1,000 = 1% of $100K)
> Earnings night → opens at $90
> Loss = 500 × $10 = **$5,000**
>
> The "1% risk" was 5%.

**Speaker:** Worked example. Hundred-dollar stock, two-dollar ATR, two-times stop at ninety-six. Sized for one percent of a hundred-thousand-dollar account, that's five hundred shares. Earnings night, opens at ninety. Stop fills at ninety. Loss is five hundred times ten dollars equals five thousand. The "one percent risk" position took a five percent loss. That single trade just wiped out four other ideas worth of room.

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## Slide 8 — Two ways to budget for gaps

**Visual:** Two boxes side by side. Box 1: "Size against worst-plausible gap (5×, not 2×)." Box 2: "Reduce position before the catalyst."

**On-slide:**
> Two fixes:
> 1. Size against the worst-plausible gap (5× ATR, not 2× ATR)
> 2. Trim position before known catalysts
>
> The framework's pre-flight does both.

**Speaker:** Two ways to handle this. One — size against the worst-plausible gap, not the ATR stop. If a five-times gap is plausible (anything pre-earnings, pre-FOMC, pre-data-print), use five-times ATR as the sizing input. Position becomes one-over-two-and-a-half-times as large; the dollar-risk-on-fire stays at one percent. Two — reduce the gap-risk surface to zero where possible. Don't hold full-size across catalysts. Trim before earnings, before known event windows, before three-day weekends with macro overhang. The framework's pre-flight chain has hooks for both.

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## Slide 9 — Chandelier Exit (the trail)

**Visual:** A trending uptrend chart with the Chandelier Exit line trailing 3× ATR below the rolling 22-day high.

**On-slide:**
> chandelier_stop = max(close[-22:]) − 3 × ATR(14)
>
> 22-day high minus 3× ATR cushion. Tags only on continuous-market pullbacks.

**Speaker:** Continuous-market trailing stops solve one problem — how to lock in gains as a winner extends without getting shaken out on normal pullbacks. The framework uses Chandelier Exit. Twenty-two-day high — roughly one trading month — minus three times the daily ATR. As the stock makes new highs, the high ratchets up; the stop trails behind by a constant cushion. Three-times ATR is wide on purpose. Tighter trails get tagged on routine pullbacks and force re-entries that are mostly slippage and emotion. The trailing stop captures the trend; it doesn't replace the trade.

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## Slide 10 — Raise-stop automation

**Visual:** Mockup of the dashboard's `↑ Raise $X→$Y` button on a card, with a two-stage confirm modal sketched.

**On-slide:**
> The Chandelier Exit only works if you actually move the broker order.
>
> Dashboard automation:
> · One-click ↑ Raise $X→$Y when chandelier > current stop
> · Two-stage modal · 18-layer guardrail stack
> · Only ever raises, never lowers

**Speaker:** A trailing stop is only as useful as your willingness to actually update the broker order. Most retail traders compute the chandelier on a spreadsheet, see it's higher than the active stop, then forget to raise it. The next pullback hits the old stop, takes a full loss instead of locking the gain. The dashboard's raise-stop automation closes that loop. When chandelier value rises above the broker stop, a one-click raise button appears. Two-stage modal — review the level versus chart, then typed confirm to send. Bracketed by an eighteen-layer guardrail stack. The button only ever *raises* — never lowers. There's no automation in the framework for moving a stop further from price; that's discretionary. Loosening a stop on a losing trade is the textbook way retail traders convert small losses into account-ending ones.

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## Slide 11 — The hierarchy

**Visual:** Three stacked rules, numbered, with arrows showing precedence.

**On-slide:**
> 1. Capital-protection stop = structural, not ATR
> 2. Trailing stop (Chandelier) raises only, never lowers
> 3. Reduce position before known catalysts

**Speaker:** Three rules stacked, applied in order. Capital-protection stop is structural — sits at the level where the thesis is broken, not where ATR puts it. Trailing stop raises as price extends, never above the structural stop, never below the current value. Position is reduced ahead of known catalysts. The reduction takes gap risk off the table at the cost of optionality on positive surprises. None of this prevents losing trades. The framework is designed to lose small and often, win big and rarely, and survive the gaps.

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## Slide 12 — What it doesn't promise

**Visual:** A blunt text slide. Two columns: "What stops do" / "What stops don't do."

**On-slide:**
> What stops do: bound the typical loss, lock in trend gains.
> What stops don't do: prevent loss, predict gaps, replace position sizing.
>
> Stops are a discipline, not a guarantee.

**Speaker:** None of the layers above promise upside. They constrain the downside. A stop bounds the typical loss and locks in trend gains. A stop does *not* prevent loss, predict gaps, or replace position sizing. Stops are a discipline, not a guarantee. The hardest part isn't computing the levels. It's the willingness to actually take the loss when the stop fires — and the discipline to size the position small enough that the loss, when it comes, is a paragraph in the journal rather than a chapter in the post-mortem.

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## Slide 13 — Closing

**On-slide:**
> Lose small and often.
> Win big and rarely.
> Survive the gaps.
>
> → Next: Lesson 07 — Reading candles without the cargo-cult patterns

**Speaker:** That's the whole job of the stop layer. Lose small and often, win big and rarely, survive the gaps. Lesson 7 turns to chart reading — what candlesticks actually encode, which named patterns survive backtesting, and which ones are folklore retail traders pay for. See you there.

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## Production checklist
- [ ] Build deck — reuse lesson 1-5 templates (gold accent on Swing Deck Learn brand, dark panel, mono captions)
- [ ] Slide 4 ATR ladder — match the article's SVG colors (green at 2×, blue at 3×, amber at 4×, red at 5×); the earnings zone shading is load-bearing
- [ ] Slide 5 gap distribution — histogram with the fat right tail clearly visible; "earnings nights" annotation as a callout
- [ ] Slide 7 catastrophe example — use the worked numbers verbatim; the "$5,000 loss" should be visually emphasized
- [ ] Slide 10 dashboard mockup — render the raise-stop button + two-stage modal sketch; keep it minimal, not pixel-perfect
- [ ] Export PDF: `06-stop-loss-math.deck.pdf`