Home Trading Strategies Average True Range Indicator Strategies & Techniques: When to use it, When...

Average True Range Indicator Strategies & Techniques: When to use it, When NOT to use it, and WHY

Average True Range Indicator Strategies & Techniques: When to use it, When NOT to use it, and WHY

hey hey what’s up my friend so in this video it’s all about the average true range indicator otherwise known as the ATR indicator this is one of my favorite trading indicators because because it’s so versatile it has so many users right there you know not many traders know off so in this training video I’ll talk about what is the ATR indicator about how to find explosive breakout traits in the market right using the ATR indicator how to place a proper stop-loss right so you don’t get stopped up prematurely right you know often traders you know put your stop-loss they get stopped out and then watch the market reverse back in their favor so if you know how to use the ATR indicator to set your stop-loss right you can sort of you know prevent that from happening happening too you know too often you’ll learn how to write massive trends in the market right that others can only dream of right you learn how to predict market reversal using the ATR indicator by applying this little timing then I’m about to share with you okay so let’s begin right so what exactly is the ATR indicator so the eight-year indicator simply is an indicator that measures volatility in the market right I repeat right the ATR indicator measures volatility in the market so as you can see as volatility expands right the ATR indicator would point up higher so you can see the ATR indicator is pointing higher because here you look at the range of the candles they are increasing all the time right consider it’s increasing and finally with this huge spike over here that coincide with this this increase in volatility over here so basically in essence right the larger the range of the candles the larger the ATR value is going to be and one thing to point out is that the ATR indicator does not tell you the direction of the trend this is not a trend indicator that tells you you know whether the trend is going up or down because as you can see over here the market is clearly going higher but the ATR value here is going lower because as I’ve said right the ATR indicator measures volatility in the market right it looks at the range of the candle so over here you can see that the range of the candles are getting smaller debts why the ATR indicator the values here are decreasing so moving on right how do you actually find explosive right breakup traits before it it happens so one thing to note firstly is that the market is always changing right it moves from a period of low volatility let’s call it low vol through a period of high volatility ok and then it moves from a period of high volatility back to a period of low volatility so it’s like a cycle right like the fall season so this is typically how the market moves right so if you have notice right that the market is in a low-volatility environment right there’s a good chance there’s a good chance right it volatility could expand in the near future so one one technique that you can use is to pull out your ATR indicator pay attention to the ATR value especially the multi-year low ATR value so this is the weekly timeframe on brain crude oil notice the ATR value right has slum right to mount ear loss over here and this pretty much right coincides right as the market isn’t in this range and volatility is shrinking up to absolute lows over here and when the market finally did break out over here right it basically had an expansion in volatility which had this a down move towards the downside so this is basically where crude oil collapse from about all right roll us down to a low about 30 or 40 dollars right so you can see that the multi-year low volatility is a huge clue to you that crude oil right it’s about to have a big move coming into the market okay so this is a crude oil example another example is a Euro Dollar same concept right looking at a weekly timeframe you pay attention to the multi-year low volatility market is an arranged volatility is low no one is no too keen to – I mean there’s no much interest in it right volatility is low and the market breakdown right volatility picked up right and basically a very huge move in euro dollar as well okay so whenever volatility is low especially when it’s approaching multi-year lows or at multi-year lows right you want to tell yourself right that if the market does breakout a big could follow right so this is a powerful powerful trading technique right moving on how do you set a proper stop-loss right when you’re trading right so this is where the ATR indicator again is so useful so often right what traders would do is like let’s say for example they look at this say this price rejection okay here right if you go along Lindsey for whatever is any Co long put in a stop loss below this low and what could possibly happen is the market come down lower trigger their stop-loss and then continue higher and this sucks right I know in this it sucks right so so you can see that you know historically the base on this shut right or put your stop-loss below this lower this load you’re gonna get triggered because the market just trigger below the lows and any really bit higher so clearly right you want to set your stop loss right away from this obvious level away from support alright so what you can do is to use the ATR indicator to tell you how much buffer you should put as your stop-loss so in this case right the ATR value is about fifty seven dollars for this market so what you can do is to identify the lows over here and then take this 57 right and – it from this loss so let’s say this loss whatever reason whatever number let’s say it’s a fifty six hundred okay the 600 okay so – fifty seven because this is 180 alright of value and you get a stop loss right off about if my meds of me okay right five five four three so your stop loss level will be around five five four three I which is 180 are below this load the reason why you’re doing this is because you don’t want the market right as I mentioned right we just come down lower trigger below the low and then really up higher so what you’re doing is in essence giving your tray your stop-loss right some buffer over here this is the buffer right so you don’t get stopped up prematurely and this is how the eight-year indicator can help you with it alright good stuff right so moving on how do you write massive trends in the market using the ATR indicator so one way to go about it is that you know when the ATR value usually so let’s say a value of let’s say uh let’s say X okay a little bit of I don’t elementary meds over here so what you can do is that you can use a multiple of X to trail your stop-loss so let’s say for example you want to write train right in you don’t know how much buffer you should give your trade right because you know if it’s too tight you might get stopped up on the retracement right so you’re gonna give it enough room so you can your end or the retracement that comes along with it so one example you can do is like use of 5x meaning a multiple of five right as your average true range so if your average true range value is let’s say $20 multiplied by five right your trailing stop loss is basically hundred dollars from the highs okay so let me share with you right so there’s this very useful indicator called the chandelier stop okay so this is basically the same concept which I’ve shared with you earlier so what you do is that the chandelier stop would take the highs over here and then calculate what is the ATR value otherwise known as X so in this case I use a 5 as my multiples I’m using 5x right so what you do is you take five multiplied by X right and this is the level which is your trailing stop loss so all you need to do is just to hold on your trade right if the market is above this level which is a 5h here from the highs and if the market does not break below it you hold on to your tree as simple as it is so this to right it’s very simple to help you write massive trends in the market of course the title your multiple write the smaller the trend your capture and the larger the multiple that you are using right the longer term the trend that you are right right so it really depends on you you know how how big of a multiple that you want to use right so as a rough general guideline right if you use a multiple of three you tend to capture medium-term trend anything above five or more you’ll capture the longer-term trend so this is a rough guideline to the multiple that you can consider using depending on the type of trends that you want to write okay and moving on all right one last thing that I want to share with you is how do you use the ATR indicator write to predict market reverse alright this is really cool so one thing to note is that the ATR indicator you can think of it as a potential energy in the market so so for example if you look at the weekly ATR and it shows you like say 300 pips alright so what it’s telling you that is based on the historical past period right the market tends to move about 300 pips right over the last few weeks okay so let’s say for example if this week the market has moved right let’s say 600 pips or five hundred pips right it’s telling you that it has really exceeded its a ATR value so it’s so-called energy that has been a spot for a week right has been used up right something that used up already so if you see a mock enos I see that it’s ATR value by two or three times right there’s a possibility right that the market could you know show signs of a could reverse from there right to put it on so here’s an example right so you can see that this is the British pound pound yen right the weekly time frame has about 300 pips right on his weekly ATR so on this candle over here you see that this market has already no collapse 500 pips in the world okay you’re not going to go long at this point in time but it should alert to you right that hey right this market has moved five hundred pips right where its weekly ATR value is only 300 pips so at the back of your mind you you want to building that you know hey the energy in this market has been used up there could be a possible reversal alright so you want to look at Clues right to the market telling you that it’s you know it could actually reverse back up higher so on the daily timeframe you see that notice right that this market came into this area of support okay and any of this bearish sorry bullish engulfing pattern right reversing and closing price back above this area of support plus you saw earlier on the weekly timeframe the market has really moved five hundred pips down lower which is almost two times the weekly ATR so this right should gives you a hits already you don’t want to be shorting the market anymore if your shot you may want to bail out of their trade and if you’re you’re bullish on this market for whatever reason plus the reasons I’m just share with you right you can look to get long right to it so called you know get on to a long side right in anticipation right off the market about to reverse higher so this is how you can know use the ATR indicator as well to do so right by basically you know looking at how much the market is exit it’s a usual ATR value right and then with other confluences like support resistance and you know candlestick patterns right you can actually identify right good areas on your chart where the market is likely to reverse okay so just a quick recap right to what you have learned today alright first and foremost the ATR indicator it measures volatility does not measure the trend the low eighty our values on which on a weekly timeframe right could potentially alert you to breakouts about to occur so pay attention to multi-year low volatility also you can use the ATR indicator to set your stop loss so and I mentioned that you can use the ATR indicator set it some buffer below the lows right as your stop-loss alright I typically use one ATR I was slight modification to the ATR is basically called the chandelier stop right basically it’s very useful to actually trill your stop-loss to right big trends and the last thing we spoke about is that the ATR indicator if he has moved yes if the market has moved more than two ETR right into an area of support resistance right it could you know snap back in the opposite direction okay so I have come to the end of this training video and if you want to learn more about my trading approach methodology or strategies right you can go down to my website trading with Rainer calm I’ll put the link below right go there and download this to trading guides are they are absolutely free and essential to you as a trader the first one is the ultimate trend-following guide where you learn how to write massive trends and market profit in bull and bear markets even the second one is all about price action trading how to better time your entries and exits reading a price action market structure and stuff like that so this two guys are absolutely free just go down to my website trading with Rainer calm click this blue button and I’ll send it to your email okay so with that said I have come to the end of this training video but if you enjoy it right please hit the like button subscribe right and if you have any feedback or comments right just let me know below and I’ll get back to you so that’s it I wish you good luck and good trading I’ll talk to you soon you


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