Today I wanted to learn more about the ATR indicator and how I could possibly use it to improve my results.
Apparently I can use a long range ATR (30+ days) to different between Trend Directions. When I tested this out, it pretty much showed me the same trend that a moving average would. Not much here.
I can use the ATR to determine volatility and decide Stops/Profit targets. Assuming I hold a trade for at least one day, I want to make sure my stop is at least one ATR away otherwise I may get stopped out too soon. This is the same for setting a reasonable limit. Could test this out and see how it fares.
Also stumbled across a possible strategy using ATR – might quickly implement it and see how it looks:
- If the price closes more than one ATR above the most recent close, buy.
- If the price closes more than one ATR below the most recent close, exit position.
- Opposite for sell.