xkavalis

Average True Range (ATR %) Stop Loss Calculator

This indicator takes the average of a series of ATR to calculate what I would consider an optimum stop loss placement represented in percentage (read below for full overview).

While the data is plotted what is most helpful are the actual numbers presented and for my charts I remove most of the plotting.

This indicator is most helpful on the daily timeframe but can be used for all timeframes such as the 4HR, 1HR or even 15M.

This indicator should not be used alone. It should be used in conjunction with proper price action analysis. It’s also a great indicator if you chart using Value Channels. Ideally you want your stop placement to be below at least one core Value Channel boundary range. In addition to standard support and resistance and some key moving averages the market respects. This also works best when trading with the prevailing BIAS of the instrument (bull or bear).

Cryptos: Generally, that means you’re buying on retracements that fit the end of a structured move. The other option is using this in a clear up trending market where the pull backs are clearly being supported with buying.

FOREX: I built another indicator for FOREX search: ATRPIPS with SL

WTI: Helpful but I have different rules for when I trade WTI. I rely upon VCs and diagnal VCs much more when trading this.

Equities: Helpful but with the increase of volatility as well as uncertainty of Bias of the market-- this should be used as more of a guide than

What is most important is the actual percentage numbers but I've found graphing 1-3 of the actual ATRs is helpful. The rest just uncheck the checkbox in the options.
Indicator Overview:
  • Value 1 - 3 Period ATR (maroon)
  • Value 2 - 7 Period ATR (green)
  • Value 3 - 30 Period ATR (blue)
  • Value 4 - 90 Period ATR (blue, bold)
  • Value 5 - 1 Period ATR (green)
  • Value 6 - 1 Period ATR (red)
  • Value 6 – Prime Stop Loss Placement (maroon). This is the average of all above ATRs multiplied by 1.5
  • Value 7 - Move Left (red). Experimental value. This is the difference between (prime stop loss) and 1 day period move. Two ways to use this value. Use as a tighter stop loss placement. The other option is to use as a retrace target for purchase and using the Prime Stop Placement value as you’re stop loss.

All ATRs use the LOW price of the period. After testing both the low and close I’ve settled on the low to capture the most volatility you will typically experience.

Once again, this indicator should be used in conjunction with your proven trade system.

Also, by knowing what the values are within the indicator you could just eye ball what would be the best stop placement depending on the ATR or 1 or 2 ATRs you find most represent the volatility of what you are trading.

I will be expanding on this indicator by bringing in average measured moves as well as volume analysis and most likely with color changes and modifications.

Background:
While using and refining my trade system I've noticed that most moves happen in 3 periods. So we start there. The 7 period is good for a 24 hour market such as crypto (although weekend trading can be a hit or miss) and to some extent FOREX. The longer periods of 30 & 90 are to smooth out the data set. The final value of the 1 period is to bring a little more recency to the calculation.

Why multiply the average by 1.5? I've found in my own trading and system I built to be the best placement (in conjunction with VCs) to ensure you're stop isn't to close and is within the instrument you are trading volatility .

I'm looking at making this more intelligent as well as take into account volume and structured moves.
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Check out my google doc: The Ultimate Primer on trading BTC, ETH, and crypto ALT coins you can find: https://goo.gl/mS2cj8

Komentarze

Having trouble understanding this.... I'm looking at EOS/USD on the Daily... current price is $4.25 and your Maroon Prime stop loss placement reads 16.92 - can you please explain where the stop loss should be? Thankyou
+5 Odpowiedz
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