Fixed-fractional sizing risks the same dollar amount per trade, but volatility-scaled sizing adjusts the position size inversely to the asset's recent volatility. The core formula is: Position Size = (Account × Risk%) / (ATR × Multiplier), where ATR is the Average True Range over N periods.

This matters because a 2% stop on a low-volatility utility stock is very different from a 2% stop on a crypto pair that can gap 15% overnight. Volatility scaling equalizes the risk contribution of each trade.

ATR-based stops: Place stops at 2–3× ATR to avoid noise-induced exits.
Inverse scaling: When ATR doubles, position size halves — dollar risk stays constant.
Correlation adjustment: If two positions are 0.8 correlated, halve each to avoid double-counting risk.
Regime awareness: Volatility clusters — high-vol periods persist, so scaling must be dynamic.

Asset	ATR (14d)	Stop (2×ATR)	Shares per $10k at 1% risk
SPY	$4.50	$9.00	11
TSLA	$12.00	$24.00	4
BTC	$1,800	$3,600	0.027