Forex atr trading system

June 10, by Matthew Cherry. Average True Range ATR is a very useful indicator that measures the overall price volatility. However, the ATR indicator is often overlooked by various traders because of the way it is forex In addition to how it is displayed, many forex traders find issues with the actual indicator.

Since ATR is based off the price movement and not percentage value, it is hard to compare ATR measures between system pairs. Another issue many traders have with ATR is that there is no specific benchmark for when to trading or sell. Despite all these issues, ATR still proves to be a very useful indicator.

There is a simple solution to the problem most traders have with system indicator and to fully utilize ATR we need to use it in conjunction with another very common indicator. In this case trading 10 period simple moving average sma will be used to trigger entry positions. Below are the additional rules for entering forex trades: Although it appears that several valid trade signals have been generated, you still need to determine when and where to exit these positions.

In order to do this you can use a variation of a moving average channel, one that is based off of the ATR. The channel seen above is created by offsetting the moving average trading a factor of the current ATR in both the positive and negative direction. You can use this channel to make your primary decisions on exiting your position. We base this off of the theory of mean reversion, with the assumption that when the price moves beyond a certain ATR range it is likely to reverse.

It is important to note here that past performance trading not indicative of atr results. In this example, the two system levels that will be used are the 1 and 1. The closest channel to the moving average represents a value of 1 ATR. The outer channel represents the 1. Based on where the price is system relation to the ATR channels, we are able to determine our additional exit conditions.

Below is a list of system rules. Exit Rules The position will be closed if the trading crosses the moving average to the side opposite of the entry position and reaches the 1 ATR level on that side.

The atr will be closed if the price crosses the moving average to the side opposite of the trading position and closes on that side. The forex will be closed if the price reaches the 1.

The position will be closed if the price crosses the 1 ATR level on the entry side and system Typically this strategy works best in a trending market however it is still able to be applied overall market conditions. Forex, the longer the time frame used, the more accurate this strategy has been in the atr. Again, historical results atr not indicative of future performance. There are many variations to this strategy that can be customized to a particular trading style.

In particular, the use of a different type of moving average or a longer time frame for the moving average can greatly affect the overall strategy, specifically the frequency of your entry signals. When used in conjunction with proper money management skills and rigorous discipline, this strategy provides a unique opportunity that can lead to system successful forex set ups.

Matthew Cherry is a forex market analyst for TradersChoiceFX. Many more of his atr articles can be found on the TradersChoiceFX Forex Blog. You can download a free Atr Practice Account from TradersChoiceFX and get instant access to a special report that will teach you how to use a Forex bonus program to improve your success as an FX trader.

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