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5.6 Trading Average True Range (ATR) instructions

the average true range is exclusively used to measure volatility. it’s as a result of this that it may be used in two ways:
1. Low volatility measurements can be utilized to get into a brand new trend
2. we will use ATR to set a stop loss relative to the foreign money pair’s particular volatility.

When coming into a brand new pattern the primary issue we want to imagine is low volatility which is shown through the typical true range. When buying and selling the 1 hour time period a good indication degree from low volatility is the 0.0006 stage. as soon as we have a reading of that stage we now have to use 2 simple moving averages for an additional affirmation – they are eight and 21 SMA. Now, we’re in search of prices to be above the eight SMA and we also need both averages to go-over. once this is complete, we have a good sign. For the ultimate confirmation we reference the H4 time frame to peer if prices are above 8 SMA and if they have got both crossed over. If this is true, we now have a established sign for entry. When using the common real range to set a cease loss we all the time set the cease loss 2 ATRs away from our entry worth. So, if the ATR studying was 0.0014, we multiply it via 2 to get zero.0028. We then set the cease loss 28 pips faraway from our entry price. this is one of the best ways to set a stop loss as a result of it is relative to the currency pair’s volatility. This also provides the prices sufficient room to maneuver round and no longer stop out early or too late.

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