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AVERAGE TRUE RANGE


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AVERAGE TRUE RANGE

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  #1 (permalink)
louisville ky usa
 
 
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how would you use ATR as a stop loss on the es.

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  #3 (permalink)
las vegas
 
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Not 100% what you are asking, but supertrend is probably the best known atr trailing stop indicator. Several threads on it if you do a search.

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  #4 (permalink)
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If you're using tradestation the StopsFlexible indicator (and function) is a nice possibility.

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  #5 (permalink)
Market Wizard
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There are several possibilities:


(1) Use the SuperTrend indicator as explained above.

(2) Use a modified Keltner Channel

(3) Use a chandelier stop (see Chuck Le Beau for definition)

https://www.remisiers.org/cms_images/guppyspeaks/ATR_CHANDELIER_VOLATILITY_EXIT_MANAGEMENT.pdf

(4) Use a simple trailing stop based on ATR

For further information see Technical Analysis of Stocks & Commodities, June 2009, Sylvain Vervoort - Average True Range Trailing Stops. The article can be downloaded from STOCKS & COMMODITIES Magazine.

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  #6 (permalink)
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I use an intitial stop of 2 ATR for swing trades, then trail the stop up in another fashion. But thats a whole other topic.

FW

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  #7 (permalink)
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I have used ATR before to no avail.

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  #8 (permalink)
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motowater View Post
I have used ATR before to no avail.

Both the Keltner Channel and the SuperTrend make use of the ATR. The ATR is definitely a powerful concept. It is difficult to trade without it.

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  #9 (permalink)
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I read an interesting paper today in my downtime.

Forecasting the Technical Range Volatility with Moving Average (TRV-MA) model.
-Haibin Xie, Guohua Zou, Shouyang Wangy


.
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AVERAGE TRUE RANGE-ssrn-id1505782.pdf  
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  #10 (permalink)
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ATR is another arrow in your quiver. How you use it depends on your strategy.

Are you buying pullbacks at support? You know the market may not bounce right at support, so you can use the ATR so you can buy as close to support as possible but are not stopped out by run of the mill, everyday volatility.

Some people use it as a trailing stop. I think most people use it as their initial stop. 2 times ATR or 2.5 times ATR etc.
The Turtles moved up their ATR stops as they laddered into positions, like a trailing stop only they set one after the last position was entered and never moved it up again. When they had a full position and the price moved far enough in their favor they used different exit strategies to give price a little more room.

I believe Van Tharp's book "Trade Your Way to Financial Freedom" discusses using volatility stops to find your position size. It's a pretty dense book but worth a read. Fat tails advice on reading Svylvain Vervoort's work is a great suggestion. I think he came up with an alternative to ATR that takes more factors into consideration when calculating.

This is more of a trend following/position trading answer. Mean-reverters would look at it differently, like using channels etc. That was a mouthful, I hope it helped.

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I use a 2.5 ATR(9) and it works for me. 2 ATR are too close and 3 are too wide for my risk tolerance.

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  #12 (permalink)
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Fat Tails View Post
Both the Keltner Channel and the SuperTrend make use of the ATR. The ATR is definitely a powerful concept. It is difficult to trade without it.

Totally agree with that. ATR is so simple, so old and so widely implemented across all platforms that I think people don't notice its true potential. People are often searching the binary supermegaindicator "all in one" and miss the exposed treasures like ATR.

Personally, I usually use ATR when setting STOPS and Profit Targets. It gives to the strategies some self-adjust capacity.

Have fun!

Sergio

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  #13 (permalink)
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Fat Tails View Post
Both the Keltner Channel and the SuperTrend make use of the ATR. The ATR is definitely a powerful concept. It is difficult to trade without it.


Harry, i am using the adr indicator, for 10 and 20 days, the atr is very different ?
thanks
alejo

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alejo View Post
Harry, i am using the adr indicator, for 10 and 20 days, the atr is very different ?
thanks
alejo

ATR : average true range
it gives you a measure of the movement of an instrument

if ATR = very low
the instrument is not moving, and you are unlikely to make profit,
as it is rather in congestion

you want ATR to be high
and if you are on the right side of the market you make money

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alejo View Post
Harry, i am using the adr indicator, for 10 and 20 days, the atr is very different ?
thanks
alejo


What instrument do you talk about?

Please post a chart.

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  #16 (permalink)
madrid spain
 
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Fat Tails View Post
What instrument do you talk about?

Please post a chart.

harry,
i was trying to understand what is atr, and it looks the same than adr?,
adr is the atr for daily chart?

here i have 4 charts with atr (14), 5,15,60,d, and i can see atr is varying, maybe is the atr of last 14 bars?
i see it is changing every bar
thanks





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  #17 (permalink)
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ADR is the average daily range over the last N days. The indicator that you used calculates a simple moving average (SMA) of the daily range of the last 10 days and the last 20 days.

ATR as shown on your daily chart is the average true range of the last 14 days. The average true range will differ from the average daily range for many reasons:

(1) Data input: your daily data may be different (full or regular session data) when compared to intraday data. This would be particularly true if you use a false session template such as 24/7 for your intraday chart.

(2) Difference between range and true range: When price gaps up or down, the gap is included with the true range but not with the range. Please make sure that you understand the difference between true range and simple range.

(3) Different moving averages used for smoothing: The average daily range is smoothed with a simple moving average, the average true range uses exponential smoothing.

(4) Wilder's definition of the smoothing period of an exponential moving average. The average true range uses a smoothing constant of 1/k. With k = 14 this is equivalent to n = 27, as 1/14 = 2/(1+ 27). The ATR(14) is therefore the same as an EMA(TR, 27), where TR is the true range and ATR is the average true range.

(5) Finally you used different nominal periods for the ADR and the ATR.

I hope that answers your question.

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Fat Tails View Post
ADR is the average daily range over the last N days. The indicator that you used calculates a simple moving average (SMA) of the daily range of the last 10 days and the last 20 days.

ATR as shown on your daily chart is the average true range of the last 14 days. The average true range will differ from the average daily range for many reasons:

(1) Data input: your daily data may be different (full or regular session data) when compared to intraday data. This would be particularly true if you use a false session template such as 24/7 for your intraday chart.

(2) Difference between range and true range: When price gaps up or down, the gap is included with the true range but not with the range. Please make sure that you understand the difference between true range and simple range.

(3) Difference moving averages used for smoothing: The average daily range is smoothed with a simple moving average, the average true range uses exponential smoothing.

(4) Wilder's definition of the smoothing period of an exponential moving average. The average true range uses a smoothing constant of 1/k. With k = 14 this is equivalent to n = 27, as 1/14 = 2/(1+ 27). The ATR(14) is therefore the same as an EMA(TR, 27), where TR is the true range and ATR is the average true range.

(5) Finally you used different nominal periods for the ADR and the ATR.

I hope that answers your question.


i do not have word to express my admiration for you
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  #19 (permalink)
madrid spain
 
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this 1min nq chart, have atr,14
as it go from 0.30 to 2.40, what i can extract from that?
how can interprete that value of atr, changing every minute

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  #20 (permalink)
 
 
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All you are seeing there is that during "active" market hours the price moves around more. In the "off" hours, there is not as much trading, and the range contracts.

I don't think a 1 minute ATR tells you anything you don't already know: higher volume times usually mean bigger ranges.

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HELLO, Question. Where will I fine the indicator: Average True Range Trailing Stop Indicator for NinjaTrader.

Thanks

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here it is. I got it from Cory.

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Register to download File Type: zip ATRTrailingStop_V2.zip (4.2 KB, 89 views)
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