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Average True Range (ATR) for Intraday Trading
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Forum on trading, automated trading systems and testing trading strategies
Indicators: Average True Range (ATR)
newdigital, 2013.08.29 09:18
Average True Range (ATR) Technical Indicator
Developed by J. Welles Wilder
The Average True Range (ATR) indicator is a measure of volatility.
The ATR indicator measures the range of price movement for a particular
price period. The ATR is a directionless indicator and it does not
indicate the direction of the Forex trend.
High ATR values indicated market bottoms after a sell off.
Low ATR values
Low ATR values indicated extended periods of sideways price movement-
Price Range, such as those found at market tops and consolidation
periods. Low ATR values are typical for the periods of sideways movement
of long duration which happen at the top of the market and during
The ATR is calculated using the following:
The final Average is calculated by adding these values and calculating the average.
The indicator of Average True Range is a moving average of values of the true range
True Average Range can be interpreted using the same principles as other volatility indicators.
Possible trend change signal - The higher the value of the ATR indicator, the higher the probability of a trend change;
Measure of trend momentum - The lower the indicator’s value, the weaker the trend movement.
newdigital, 2013.10.23 18:52
Average losses (in red) far outpace average wins (in blue) :
The first step to avoiding The Number One Mistake Forex Traders Make is
to set a stop. This allows you to cap the risk on any one trade, so that
if it doesn’t go in your direction, you can stem the bleeding before it
becomes too unbearable.
Below, we’re going to look at two popular, yet different ways of setting
stops. One easy way that is often employed by professional traders for
the sake of simplicity; and another more advanced method that may suit
certain trading styles more adequately.
The Easy Way
First off, just because this is an easier way of setting a stop does not
make it any less valid. This is classified as ‘the easy way’ simply
because most traders can pick this up right now, and begin using it
instantly with a minimum of instruction.
Average True Range is a favorite indicator of many professional
traders, and one of the great things about it is that it’s rather simple
in its design. While many indicators wear multiple hats and try to do a
few different things at once, ATR is just a measure of price movements
over a specific period of time.
If those movements increase in value, ATR goes up. If those movements decrease, ATR goes down (see below).
ATR measures volatility, and this allows traders to set stops based actual market behavior :
There are a few nuances of ATR that traders need to know before
applying. We cover these, in depth in the article Managing Risk with
ATR. The first is the format with which the indicator displays values.
While it looks like an oscillator like RSI, and moves similar to an
indicator like ADX; the real value of ATR is in its value. It will
measure the ‘Average True Range’ of the last x periods, where x is the
input you choose. The default, and most common input for ATR is 14
periods. The value of ATR will read in the price format of the currency
pair being analyzed. So, for instance; if a value of .00760 is shown on
EURUSD, that means 76 pips (4th place to the right of the decimal is a
single pip in the quote).
ATR displays values in the format of the currency pair’s price :
There is a slightly easier option, and for traders that are using
short-term techniques this can be extremely helpful. There is a custom
indicator available for Trading Station desktop that automatically
calculates, and displays ATR on the chart in a very easy-to-read format.
This is completely free, and can be downloaded from the FXCM App Store
at this link (link). As you can see below, not only does it display ATR,
but it even rounds the ‘.6’ fractional pip as appropriate.
The ‘ATR_Pips’ Indicator displays Average True Range in an easy-to-read format :
The Advanced Way
Price Action can have a huge impact on a trader’s performance.
Inclusion of price action into an approach will often take place
regardless of the trader or type of trading being done. Price action can
help traders read trends, find support and resistance, and perhaps most
importantly - manage risks.
Because, after all - if prices are trending higher, and we’re seeing
continuous higher-highs, and higher-lows, wouldn’t it be reasonable to
consider closing the trade if the trend reversed?
Remember, this is the number one mistake traders make, and this is the
reason stops are so important. If the trend reverses, the trader’s best
advice is often to close the trade and look for greener pasture
elsewhere... because if the reversal continues against the trader, one
loss can wipe away a lot of gains.
If traders are trading a trend, they can look to the previous
opposing-side swing for stop placement. So, if an up-trend is being
traded, we should be able to see higher-highs, and higher-lows. If we
are buying to take part in the up-trend, we can look to place our stop
below the prior swing-low (see picture).
During an up-trend, stops can be placed below the previous swing-low :
On the other hand, if we’re selling in a down-trend, we would want to look to place our stop above the prior swing-high.
During down-trend, stops can be placed above the previous swing-high
In How to Analyze and Trade Ranges with Price Action, we look at stop placement in
range-bound markets. If a range is being traded, the ‘peak-high’ and ‘peak-low’ should be identified (see below).Traders can look to place their stop just outside of the peak of the
opposing side of their position. So, if buying, traders would look to
place their stop just below the peak-low; and if selling just above the
peak-high. This way, if the range turns into a breakout against the
trader, the bleeding can be stopped before one loser wipes away the
gains from a lot of winners.
If you’d like to become a better Price Action trader, we’ve put
together the basics into a Brainshark curriculum. The link below will
take you directly to the lesson, and after filling in a few pieces of
information into the guestbook the session will begin.
Ichimoku technical analysis & online day trading strategies
In this online trading education course, Ichimoku Kinko Hyo (Pronounced:
Ichiii...Mooooo...Kuuuu) is a technical trend based system that
powerfully illustrates support and resistance values in a simplified
form and is considered an extension of the very popular candlestick
charting system. In fact, this system was built on the idea that at
"one glance" you should be able to easily determine whether an
instrument is in equilibrium (consolidation) or out of equilibrium
More video on this subject:
Ichimoku threads/posts on mql5.com forum
Ichimoku indicator description
Something Interesting to Read February 2014
newdigital, 2014.02.25 16:46
Cloud Charts : Trading Successful with the Ichimoku Technique by David Linton
David Linton, the author of Cloud Charts, had his interest in Ichimoku
charts `sparked' during a presentation by Rick Bensignor at the 2004
IFTA conference in Madrid. David had heard of the method prior to the
conference but credits Rick with presenting it in an `understable' way.
David set out on a quest for Ichimoku knowledge. He researched the
internet, questioned Japanese delegates at subsequent IFTA conferences,
sought out Rick Bensignor at conferences and meetings and even flew to
Tokyo. The fruit of that quest is the book, Cloud Charts.
The Ichimoku method is now fast becoming popular in Western trading
rooms and is available on almost all technical analysis software. David
must take some credit for turning what seemed to be an exotic and
complicated method into an easily understandable and robust trading and
analysis tool for non-Japanese speaking technical analysts.
So, what is Ichimoku? The full name of the method is Ichimoku Kinko Hyo
which means 'at one glance balance bar chart'. Ichimoku charts were
devised by Goichi Hosoda , a Tokyo journalist, who believed that once
the method was fully understood, one could comprehend the exact state of
a market at a glance. Most of the Ichimoku indicators represent
equilibrium in one time frame or another and price action is generally
analysed with regard to whether the market is in equilibrium, moving
away from it or reverting back to it. By their nature, the various
indicators also offer dynamic areas of support or resistance.
Cloud Charts is divided into three parts. The first is for the novice
technical analyst and is designed to give them an understanding of many
basic technical analysis concepts involved with not only Ichimoku
analysis but also traditional techniques. More experienced technical
analysts may wish to skip this part.
Part two introduces the reader to the basic indicators used in Ichimoku
charts (David calls them cloud charts). This section deals with the
derivation and interpretation of:
1. The Turning Line (also called the Conversion Line)
2. The Standard Line ( also called the Base Line)
3. The Cloud Span A ( also called the Cloud Span 1)
4. The Cloud Span B (also called the Cloud Span 2)
5. The Lagging Line ( also called the Lagging Span)
Part two offers a guide to applying Ichimoku charts in a multiple time
frame sense, as well as the often overlooked Wave Principle, Price
Targets and Time Span Principle. However, the application of Ichimoku
charts to price and time projection is very subjective and for that
reason alone the projections are quite often not utilised by even
Looking at an Ichimoku chart, it's no surprise that analysts are
sometimes turned off by the busyness of the chart. It can look like
chaos to the uninitiated but the key to getting past that is
understanding the formula to each indicator, how they combine with each
other, how they represent a consensus of price action in different time
frames and colour-coding. In part two David explains construction and
interpretation of the charts in a manner that is easy for any newcomer
to technical analysis let alone a professional on a trading desk.
Part three, is where we are encouraged to think outside of the box.
Here, the use of Ichimoku charts are combined with other technical
analysis techniques, alternative time inputs into the indicators are
suggested and the application to market breadth analysis is considered.
There is also a chapter on back testing for the quantitative traders to
Overall, this book, in an easily read manner, brings together the body
of knowledge of a Japanese technical analysis method which was once
thought of as exotic and over-complicated. It has potential to become
the definitive English language text on the Ichimoku Kinko Hyo technical
Boosting RSI with the Modified Inverse Fisher Transform (MIFT) - Part 1
Upside price action can be in sharp contrast to what is experienced to
the downside. "The market goes down like an elevator but up like an
escalator," as prices tend to fall faster than they rise. At the same
time, technical indicators, such as the well-known Relative Strength
Index (RSI), treat rising prices the same as falling prices. Adjusting
the indicator distribution with the Modified Inverse Fisher Transform
(MIFT) helps to account for those differences and provides new trading
applications. This paper will introduce the TSLabs: Modified Inverse
Fisher Transform custom indicator with practical examples to explore and
apply in trading.
The article : Applying The Fisher Transform and Inverse Fisher Transform to Markets Analysis in MetaTrader 5
Indicators from MT5 CodeBase :
Case shows slides about what strategies to use in high and low implied volatility situations. Her and Tom talk about how the market conditions affect the types of plays she makes.
Market Condition Evaluation based on standard indicators in Metatrader 5
newdigital, 2013.09.01 21:06
This my post? red dotted lines are for possible sell stop trade, blue dotted lines are are possible buy stop ...
Anyway - I just copied some latest summary from this thread :
Market Condition Evaluation
story/thread was started from here/different thread
more to follow ...
MA Channel Stochastic system is here.
Correctly Using MACD/Fibonacci Technical Analysis
It is mostly related to trading options (same with previous video) but it is interesting to watch because it is real practical example.
Most traders use MACD/Fibonacci analysis wrong. Here's the right way to use these indicators along with some live examples!
Question - Should I Hold My Trade Over the Weekend?
Ichimoku Currency Forex Trading Strategies And Education
Something Interesting in Financial Video March 2014
newdigital, 2014.03.03 12:02
This is stock market how-to information
A variety of integration gateways to liquidity providers and stock
exchanges have recently been developed for MetaTrader 5 trading
platform. Using these solutions, brokers now can greatly improve their
business and enter new markets. We have decided to summarize the first
integration results and make a list of already working MetaTrader 5
ECNs (Electronic Communication Networks) provide liquidity when using
MetaTrader 5. We have developed gateways to the most well-known
providers, and any MetaTrader 5 broker can now make use of their
Our gateways not only give access to liquidity providers but also
provide maximum speed of executing operations. Moreover, these gateways
are fairly simple and secure solutions allowing brokers to quickly
connect to a provider and use its services.
MetaTrader 5 has been developed as a multi-market platform. Nowadays, it can be used not only for arranging Forex trading but also for working on stock exchanges:
MetaTrader 5 platform's versatility makes it easy to expand the
brokerage business and enter new markets. For example, any Forex broker
can start working on a stock exchange, as well as a stock broker can
launch the platform on an exchange and then enter Forex market. In any
of these cases, all MetaTrader 5 technologies and services (social, mobile and algorithmic trading, as well as the market of trading robots) retain their functionality and remain attractive to traders.
The platform's features go beyond the proposed list, and the works on
integration of MetaTrader 5 with other stock exchanges and liquidity
providers are currently underway. Besides, Gateway API allows brokers to
develop a gateway to any system or exchange on their own. Some brokers
have already done that, while the proposed interfaces have greatly
simplified their work. Moreover, API allows development of a hybrid ECN
engine with multiple providers. That engine will act as trading server's
own ECN platform.
Indicators: Custom Moving Average
newdigital, 2013.07.31 07:53
In the example below we use 10 and 20 moving averages to generate Forex
signals; the signals generated are able to identify the trend as early
Scalper Trading Using Moving Averages
One of the most widely used method of technical analysis used to trade
price fluctuations in scalp trading is the use of moving averages.
moving averages is an indicator that provides a profitable chart
structure for scalp trader.
The idea behind moving averages is to simply enhance analysis before
taking a signal to enter the market. Planning and setting goals in the
short-term according to moving averages helps a trader to identify
interests in the market and thus trade accordingly.
Most of the targets can be established using a specific period on MA.
The moving averages determines whether the trader will scalp in a
short-term long-term. In addition, the price action above or below the
price determines the state of the market for the trading day.
If a large part of the price action is considered to be below the MA,
then bias trade/forex trend for the day is short. Most traders the use
the MA as support or resistance to determine where to enter a trade, if
price touches the MA in the direction of the forex trend a trade is then
The moving averages are plotted and the intersection point with the
price action can be used to determine the appropriate entry and exit
times in the market. Since there is always oscillation in the forex
trends and activities of the price action on the market, the price will
repeat this process of oscillating and bouncing off the MA and this can
be used to generate forex trading signals.
Scalp trader use moving averages define the price floor in an upward Forex trend and price ceiling in a downward Forex trend.
Simple moving averages are calculated and their approach is based on the
observation of price within a particular period of time using
sufficient data to calculate the moving averages is what moving average
are all about? The interpretation of the moving averages has provided
many scalp traders with lots of tips on how and when to trade a
Medium-term Trading with Moving Average
Medium term trading will use the 50 period MA.
The 50 period MA acts as support or resistance level for the price.
In an uptrend the 50 period MA will act as a support, price should
always bounce back up after touching the MA. If price closes below the
MA then it is an exit signal.
50 period MA Support
In a downtrend the 50 period MA will act as a resistance, price should
always go down after touching the moving average. If price closes above
the moving average then it is an exit signal.
50 Day Moving Average Analysis in the Forex Market
As your currency pair moves up in price, there is a key line you want to
watch. This is the 50 day moving average. If your currency pair stays
above it, that is a very good sign. If your currency pair drops below
the line in heavy volume, watch out, there could be reversal ahead.
A 50 day MA line takes 10 weeks of closing price data, and then plots
the average. The line is recalculated everyday. This will show a
currency pair's price trend. It can be up, down, or sideways.
You normally should only buy currency pairs that are above their 50 day
MA. This tells you the currency pair is trending upward in price. You
always want to trade with the trend, and not against it. Many of the
world's greatest traders, past and present, only trade or traded in the
direction of the trend.
When a successful currency pair corrects in price, which is normal, it may drop down to its 50 day MA.
Winning currency pairs normally will find support over and over again at
that line. Big trading institutions such as mutual funds, pension
funds, and hedge funds watch top currency pairs very closely. When these
big volume trading entities spot a great currency pair moving down to
its 50 day line, they see it as an opportunity, to add to, or start a
position at a reasonable price.
What does it mean if your currency pair price slices downward through
its 50 day line. If it happens on heavy volume, it is a strong signal to
sell the currency pair. This means big institutions are selling their
shares, and that can cause a dramatic drop in price, even if
fundamentals still look solid. Now, if your currency pair drops slightly
below the 50 day line on light volume, watch how the currency pair acts
in the following days, and take appropriate action if necessary
Long-term Trading with Moving Average
Long term trading will use long period moving averages such as the 100 and 200 moving average.
These moving averages act as long term support and resistance levels.
Since many traders use the 100 and 200 moving averages price will often
react to these support and resistance levels.
Learn about the 200 day MA
In Forex Trading, investors can use both fundamental analysis and
technical analysis to help determine whether a currency pair is a good
buy or sell.
In technical analysis technique traders looking to gauge supply and
demand for a currency use the 200 day moving average to examine data in
Traders are most familiar with the basic analysis of MA. The 200 day
moving average is used to plot the long term support or resistance
level. If price is above 200 day MA then price is bullish, and if it is
below then it is bearish.
One of the ways to measure supply and demand is to calculate the average
closing price over the last 200 trading sessions. this accounts for
each day going back in time and shows how this 200 day average has moved
hence the term 200 day MA.
The reason why the average 200 day MA in particular is so popular in
technical analysis is because historically has been used with profitable
results for trading in the forex market. A popular timing strategy is
used to buy when price action is above its moving average of 200 days
and sell when it goes below it.
With individual currency pairs, investors can benefit from being
notified when a currency pair rises above, or falls below its 200 day
Moving Average and then use fundamental analysis to help determine if
the signal is an opportunity to go long or short.
newdigital, 2013.07.31 07:58
A buy trade can also be opened when price touches the 100 Simple moving
average, provided it’s not very far from the 200 SMA. Normally the 100
SMA will be within the 20 pips range of the 200 SMA.
Sell Signal – Forex Downtrend/Bearish Market
To generate Forex sell (short signals) using the 20 pips moving average
Forex trading strategy, we shall also use the 1hour and 15 minute chart
On the 1 hour chart time-frame, the price should be below both the 100
and 200 simple moving average. We then move to the 15 minute chart
time-frame to generate a Trading Signal.
On 15 minute chart, when price reaches the 20 pips range below the 200
SMA, we open a sell trade and place a stop loss 30 pips above the 200
simple moving average.
With this method price will generally bounce of these levels because
many traders watch these levels, and open similar trades at around the
These levels act as short term resistance or support levels within the currency price charts.
Profit Taking level For This Trading Strategy
With this trading strategy the price will bounce and make a move in the
direction of the original Forex trend. This move will range from 70 -
The best profit taking level would therefore be considered to be 80 pips from the 200 simple moving average.
newdigital, 2013.07.31 07:48