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Hi Lionel.
> How is the ATR (average true range) used as a trading tool?
> How does one plot ATR bands, as different to simply plotting the ATR
> indicator.?
I use ATRs for lots of things in trading:
1. Initial stop loss eg. entry price - 2*ATR(15)
2. Trailing profit stops eg. Highest high since entry - 3*ATR(15)
(use a different multiple for different trading styles, maybe also
incorporate other exit strategies too - time-based stops etc.)
3. Position sizing (ala Dr. Van K Tharp)
4. Volatility breakouts - where today's expected price range exceeds
yesterday's price by ATRs by a given factor
5. Identification of trends running out of steam (ATR accelerates in
the terminal phases of a trend)
Hope that helps.
Cheers,
RICHARD DALE
IT PROJECTS MANAGER
daytraderHQ Ltd
Level 4, 66 Kings Park Rd
West Perth
Western Australia 6005
Phone: (08) 9226 0767 Fax (08) 9322 9998
Email: rad@xxxxxxxxxxxxxxx
Web site: www.daytraderHQ.com
YOU'LL NEVER TRADE ALONE
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