The ATR is useful in that it defines the volatility of the price of the underlying over a specified time frame .This can, of course, be adjusted to suit the individual trader. It can help in deciding a stop loss level or to determine an entry point once other signals are favourable.

ATR is available on MT4 platforms without any additional plug-ins.

ATR is used in these situations:

  • Setting Stop Loss
  • Looking for consolidation
  • Market highs and lows

To turn on ATR, it is chosen from indicators menu. It is marked as Average True Range. In the options menu, there is no immediate need to change anything. The default setting is 14 which is a useful starting point until you become more used to the benefits of the indicator.

The fact that this indicator has one and only value to set is definitely its advantage. For example MACD has 3 values, it makes that you can manipulate them to match historical chart. It is very often a trap. Investor will choose proper settings and believe that it will still be valid in the future. Markets do not work like that.

How to use ATR? Check our next article!

Error, group does not exist! Check your syntax! (ID: 3)