Introduction to the ATR Value Indicator
ATRs are one of the tools used by some traders to help them determine trend reversals. The concept is that they would determine a multiplier of the ATR and if price reverses against the current trend direction by more than the product of the multiplier and the ATR, the currency pair is considered to have reversed trend direction. As such, traders can also use the ATR to determine proper stop loss placements based on an assumed trend reversal.
The ATR Value Indicator simplifies the process of determining stop loss placements using the ATR as the main variable.
What is the ATR Value Indicator?
The Average True Range (ATR) indicator is a classic technical indicator which provides traders with the information regarding the average range of price movements of each candle based on a predetermined number of periods. These values are often measured in pips or points.
The ATR Value Indicator is a custom technical indicator which is based on the ATR. The value that this indicator identifies is displayed on the price chart.
How the ATR Value Indicator Works?
The ATR Value Indicator computes for the product of its underlying ATR value and a multiplier. For example, the ATR value in points is 100 points and the multiplier is 2. The result would be 200 points. This value would then be displayed on the upper right-hand corner of the price chart. The ATR Value Indicator would also include the number of periods the ATR is based on as well as the multiplier which is displayed in percentage form.
Variables such as ATR Period and multiplier can be modified under the Inputs tab of the indicator settings. It can also be modified to display values either in points or pips.
How to use the ATR Value Indicator for MT4
The ATR can be used in a variety of ways. It can be used as a basis for determining viable take profit targets, identifying trends and trend reversals, as well as determining potential stop loss placements.
This indicator however was developed to help traders easily determine stop loss placements. The value displayed on the upper right-hand corner of the price chart can be used as the stop loss distance.
Buy Trade Setup
When to Enter?
Identify a potential buy trade based on other bullish trade setups. Set the stop loss distance based on the value displayed by the ATR Value Indicator.
When to Exit?
Set the take profit target based on the trade setup and allow price to reach the target take profit price.
Sell Trade Setup
When to Enter?
Identify a potential sell trade based on other bearish trade setups. Set the stop loss distance based on the value displayed by the ATR Value Indicator.
When to Exit?
Set the take profit target based on the trade setup and allow price to reach the target take profit price.
Conclusion
This indicator is a great tool to help traders determine an objective and normalized stop loss distances based on the volatility of the currency pair and the time frame used for the trade setup.
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