Average true range forex trading

This is the second article in our ATR series.

Traders rarely use the indicator to discern future price movement directions, but use it to gain a perception of what recent historical volatility is in order to prepare an execution plan for trading. It is not a leading indicator in that it divulges nothing related to price direction.

High values suggest that stops be wider, as well as entry points to prevent having the market move quickly against you. With a percentage of the ATR reading, the trader can effectively act with orders involving proportionate sizing levels customized for the currency at hand.

The key points of reference are highpoints, lowpoints, or extended periods of low values. The ATR attempts to convey pricing volatility, not pricing direction.

Average True Range (ATR)

It is traditionally used in tandem with another trend or momentum indicator to set stops and optimal entry point margins. Skill in interpreting and understanding ATR signals must be developed over time, and complementing the ATR tool with another indicator is always recommended for further confirmation of potential trend changes.

In the next article on the ATR indicator, we will put all of this information together to illustrate a simple trading system using this ATR oscillator.

The Average True Range Indicator | Trading For Beginners

Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit.

ATR Strategy - How to Use the ATR in Forex Trading

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ATR Indicator Explained – What is the ATR Indicator?

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