ATR breakout system
ATR tells about market volatility. Lower ATR values represent lower volatility and higher ATR values represent higher volatility.
ATR NEVER TELLS TREND DIRECTION.
This system uses EMA in very different way. Most of u have used EMAs on chart. But here u will use EMA on ATR.
First set ATR then from indicators' window drag MA on the chart abnd drop where ATR is placed. Make sure to adjust MA settings to exponential moving average with period of 14.
Now u will see two lines (one for ATR and second for EMA) as shown in the attached image.
As u can see in image ATR and EMAs r crossing each other on multiple occasions. When ATR is about to cross EMA from below, it means activity level is about to rise. We do not know the trend direction but we do know that market volatility is about to increase. So place two orders, one on sell side (a few pips lower than current price) and one on buy side(a few pips higher than current price. You will set an approximate price and u will get better at setting a price once u practice this system. When a breakout occurs, one of ur order will be triggered.
Your TP is as long as the ATR remains above EMA.
Your SL is opposite side of trend.
The tricky part in this system is to correctly set sell and buy orders. This can only be learnt by practice.
There is one big disadvantage of this system. Increase in activity doesnt mean directional increase. Market can be ranging instead of trendy. If this is the case then even if the trade is triggered, it will can go to loss side and may reach SL as SL is on opposite side trade triggered.
The good or ill of a man lies within his own will. – Epictetus
I have never tried ATR levels. So cannot say much about this system. But ironical's question is right that volatility can be ranging and may end sooner than we expect it to end.
Stick to your rules
Nice sharing. This system has logic and I will test it on a demo
Above example looks ideal and may not happen always. For example a breakout may occur when volatility level is already high and may not occur when volatility is about to begin.
Originally posted by JogiAbove example looks ideal and may not happen always. For example a breakout may occur when volatility level is already high and may not occur when volatility is about to begin.
Well the best thing is to try it out. No system is perfect and same goes for this system. I have never tried ATR so cant say if the current scenario will produce positive results or not. But by trying it out, we can know about its weakeness and strength.
Stick to your rules
Hey. Thx for sharing. ATR diagram is really neat and clean but I think a diagram of chart with atr diagram would have helped a lot. I can understand that whenever ATR & EMA cross each other, we can open a trade but it can exactly be explained through a chart.
Originally posted by Champ
Originally posted by Jogi
Hey. Thx for sharing. ATR diagram is really neat and clean but I think a diagram of chart with atr diagram would have helped a lot. I can understand that whenever ATR & EMA cross each other, we can open a trade but it can exactly be explained through a chart.
Thx for ur comments.
To understand strategy, I think above diagram is enough. But if we want to see results, then we have to test it on our own.
i hope you can assist us by explaining the principles on how the indicator works. Try to tell us the timeframe the indicator works best and use of the indicator. Thanks for posting such indicator.
This indicator works on the principle of volatility in market. This system helps in predicting when market volatility is about to rise so that trader can enter into a position before it rises.
4hr timeframe or 1D timeframe can be used with this system.