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    How To Use The Average True Range Free PDF

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    Edbertiscoming
    The average true range (ATR) is a volatility indicator that measures market volatility by showing the average price range over a specific period. Traders can use the ATR to help determine appropriate profit targets and stop losses by taking into account the prevailing volatility, with higher ATR indicating larger expected moves and thus potential for larger profits or stop distances. The ATR is also commonly used to trail stop losses by moving the stop a set number of ATR values from the current price.

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    How To Use The Average True Range Free PDF

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    Edbertiscoming
    225 views8 pages
    The average true range (ATR) is a volatility indicator that measures market volatility by showing the average price range over a specific period. Traders can use the ATR to help determine appropriate profit targets and stop losses by taking into account the prevailing volatility, with higher ATR indicating larger expected moves and thus potential for larger profits or stop distances. The ATR is also commonly used to trail stop losses by moving the stop a set number of ATR values from the current price.

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    How to Use the Average True Range Free PDF

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    The average true range (ATR) is a volatility indicator that measures market volatility by showing the average price range over a specific period. Traders can use the ATR to help determine appropriate profit targets and stop losses by taking into account the prevailing volatility, with higher ATR indicating larger expected moves and thus potential for larger profits or stop distances. The ATR is also commonly used to trail stop losses by moving the stop a set number of ATR values from the current price.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    225 views8 pages

    How To Use The Average True Range Free PDF

    Uploaded by

    Edbertiscoming
    The average true range (ATR) is a volatility indicator that measures market volatility by showing the average price range over a specific period. Traders can use the ATR to help determine appropriate profit targets and stop losses by taking into account the prevailing volatility, with higher ATR indicating larger expected moves and thus potential for larger profits or stop distances. The ATR is also commonly used to trail stop losses by moving the stop a set number of ATR values from the current price.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    The key takeaways are that the average true range (ATR) is an indicator that measures market volatility over a period of time and can be used to help determine appropriate profit targets and stop losses.

    The average true range measures the volatility of a currency pair or asset over a specific period by taking the average of the true ranges over that period. The true range is the greatest of: the current high minus the current low, the current high minus the previous close, and the current low minus the previous close.

    The average true range can help identify potential profit targets, as larger ATR readings indicate the market is more likely to make bigger moves. Traders can use a multiple of the current ATR reading to set profit targets. Small ATR readings may indicate trades to avoid as meeting risk/reward criteria is less likely.

     

    How to Use the Average True Range 


    Free PDF 

    1 
     
     

    The average true range is an indicator that highlights market volatility. It does this 
    by showing you how much a Forex pair or asset has moved on average over a set 
    time period. 

    You can use the average true range (ATR) in multiple scenarios in your trading 
    including helping you find appropriate profit targets and where to set your stop 
    loss to suit the market conditions. 

      

    What is the Average True Range 

    The average true range was created by​ ​J. Welles Wilder​ to measure volatility. 

    As price makes larger or smaller moves higher or lower the ATR becomes bigger or 
    smaller indicating the asset volatility. 

    The ATR is shown in pip amounts for Forex or dollar amounts for other markets. For 
    example; a reading of 0.50 would mean 50 pips in the Forex market. 

    The standard setting for the ATR range is 14 and can be used on any time frame you 
    choose. 

    As each new time frame closes the ATR is calculated. For example; on a daily chart 
    the ATR is calculated at the close of the next daily time period. 

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    These 14 time readings are then added together to show you a continuous line that 
    will give you a quick indication of overall asset volatility. 

    The average true range cannot be compared from one market to another or one 
    Forex pair​ to another. If an asset has a higher price, then it will have a larger ATR 
    compared to a market or stock with a smaller price. 

      

    How to Calculate the ATR 

    To calculate the ATR range over a certain time period, the 'true range' is first 
    calculated. 

    The true range is calculated by finding the greatest value of; 

    1. Current high minus the current low. 


    2. Current high minus the previous close. 
    3. Current low minus the previous close. 

    After the true range is found over 14 periods, it is averaged to find the ‘average true 
    range’. 

    If you are using the standard 14 day time period you can then use this information 
    to calculate the ATR on a monthly, weekly, daily or intraday time frame. 

      

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    How to Use the Average True Range on MT4 and MT5 

    Setting up and using the ATR in your Metatrader charts is quick and simple. 

    To do this open your MT4 or MT5 charts. 

    Click; “Insert” >> “Indicators” >> “Average True Range”. 

    A box will then open with the standard settings that you can change to suit your 
    needs. These include the color that the ATR will show in and the time period that 
    the true range will average over. 

      

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    How to use the ATR 

    Whilst the ATR is not an indicator you're going to use to find new​ ​trade signals​, it is 
    an indicator that you can use to find better profit targets and stop loss areas. 

    The ATR will highlight the different market conditions and help you identify when 
    they are changing allowing you to set larger stops or look for bigger profits. 

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    Using the Average True Range for Profit Targets 

    A lot of traders are using a form of​ r​ isk reward​ with their stop loss and profit 
    targets. For example; risking 1 and looking for 2 reward. 

    The ATR can be used to help you identify potential profit targets and also work out 
    if a trade entry is suitable. 

    If you find a potential trade that has a very large ATR, then you know price is more 
    likely to make a large move. If you get your trade call correct you can use this 
    information to set a larger target. 

    You can also use the ATR to spot trades that you should stay clear of because they 
    have a small ATR and do not have a high chance of meeting your risk reward 
    criteria.  

      

    Using the Average True Range for Stop Loss 

    The average true range is commonly used for setting a stop loss and also trailing a 
    stop loss. 

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    One strategy for using the ATR to set your stop loss is using a multiple of the 
    average true range. For example; you may set your stop 2 x the ATR away from the 
    current price. 

    You could also use this strategy for trailing your stop. If price moved in your favor 
    and you were looking to lock in profits you could use a multiple of the ATR to trail 
    your stop higher or lower behind the current price. 

      

    Conclusion 

    Whilst the ATR is not an indicator that will help you find trades or spot the​ ​market 
    trend​ like a moving average, it can help you identify the recent volatility or lack 
    thereof. 

    You can then use this information to your advantage by either passing on trades, or 
    when a suitable trade is found, setting appropriate stops and targets.  

    The ATR is best used with your other tools and trading strategies including your 
    price action trading systems. 

    Using the average true range this way you can identify the volatility and then read 
    the charts to find high quality trade entries. 

      

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