We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bearish
More View more
Real Time News
  • The Japanese Yen has faded into 2020 as market risk appetite has held up and hit demand for haven assets. $USDJPY now challenges a key medium-term downtrend, but hasn’t topped it yet.Get your market update from @DavidCottleFX here:https://t.co/4X6vgCgkB7 https://t.co/cEUZlD8FoF
  • The current astonishing price difference between #crudeoil and #naturalgas may tell us much less about global growth prospects than you might think. The US gas industry is well supplied with shale producers adding to the glut. https://www.dailyfx.com/forex/fundamental/article/special_report/2020/01/22/Crude-Oil-Natural-Gas-Prices-Part-Ways-What-Does-This-Mean-.html?utm_source=Twitter&utm_medium=Cottle&utm_campaign=twr
  • My trading video for today: 'Dow, Emerging Markets and Yuan Hit by Coronavirus-Tinged Risk Aversion' https://www.dailyfx.com/forex/video/daily_news_report/2020/01/22/Dow-Emerging-Markets-and-Yuan-Hit-by-Coronavirus-Tinged-Risk-Aversion.html?ref-author=Kicklighter?CHID=9&QPID=917719 https://t.co/vihwKOdVr5
  • Commodities Update: As of 03:00, these are your best and worst performers based on the London trading schedule: Silver: -0.29% Gold: -0.41% Oil - US Crude: -0.46% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/8kdO6Qqkow
  • The $GBP may be on the cusp resuming a 12-year downtrend against the US Dollar as signs of topping emerge at pivotal chart resistance. Get oyur market update from @IlyaSpivak here:https://t.co/9rM3OjWmBA https://t.co/C1voqDy4hc
  • Forex Update: As of 03:00, these are your best and worst performers based on the London trading schedule: 🇪🇺EUR: -0.01% 🇦🇺AUD: -0.05% 🇬🇧GBP: -0.06% 🇨🇦CAD: -0.11% 🇨🇭CHF: -0.12% 🇯🇵JPY: -0.16% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/dagocTZSUu
  • RT @KateBennett_DC: Do you, Larry Kudlow. https://t.co/n14RUZZRGy
  • Note that gains in $AUDUSD and $NZDUSD are somewhat contained by strength in the US Dollar. I wrote a special report that explains this dynamic into further detail as the pairs diverge with the #SP500 here - https://www.dailyfx.com/forex/fundamental/article/special_report/2020/01/17/AUDUSD-NZDUSD-Outlook-Looks-Past-Stocks-to-Rate-Cut-Bets.html?ref-author=Dubrovsky
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.34%, while traders in Germany 30 are at opposite extremes with 82.00%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/OHd6ymoGC1
  • Asia turns "risk on" as fears around the #coronavirus seem to be cooling. China's Health Commission delivered a briefing, detailing measures to help contain spread of the disease. #SP500 futures on the rise. Anti-risk #Yen lower, #USD up $USDJPY #AUDJPY - https://t.co/EO3GjV4Cel https://t.co/OOE3DBUvOr
Manage Stops Like a Professional: ATR

Manage Stops Like a Professional: ATR

2012-05-24 16:38:00
Walker England, Trading Instructor,
Share:

Managing a trade can be one of the most difficult tasks a trader faces. Lucky for us there are a variety of indicators we can use to help in the process! Our last discussion, March 10th Chart of the Day, had us implementing a trailing stop using PSAR. Today we will focus on another method, setting fixed stops using the ATR indicator.

ATR (Average true range) is an excellent indicator found inside of Marketscope 2.0 that can be used to establish initial stop levels on a trade. The indicator is another creation of Wells Wilder and was designed to measure market volatility. It achieves this by comparing previous highs and lows of a currency pair for a set number of periods. The greater the difference between these two points, regardless of market direction, the higher ATR will read.

Traders can use ATR to actively manage their position in accordance to volatility. The geater the ATR reading is on a specific pair the wider the stop that should be used. This makes sense as a tight stop on a particularly volatile currency pair is more prone to be executed. As well a wide stop on a less volatile pair may make stops unnecessarily large. Lets take a look at some examples. A good rule is to place initial stops at minimum 1X the ATR amount for your trade.

Manage_Stops_Like_a_Professional_ATR_body_Picture_2.png, Manage Stops Like a Professional: ATR

Above we have a graph depicting the strong downtrend developing on the EURJPY pair for the month of May. We have taken a variety of trades on this pair using many different strategies. One constant that remains the same is that a stop is needed on the position. Reading ATR we can see for this time period volatility has changed. Currently on the 4Hour graph, ATR is reading 50 and has been increasing. This means we need to be prepared for more volatility and use bigger stops as opposed to previous levels where ATR held a reading of 36.

Manage_Stops_Like_a_Professional_ATR_body_Picture_1.png, Manage Stops Like a Professional: ATR

Finally, ATR can also be a gauge for the placement of limit orders. Using the 4Hour EURGBP chart above ,a 1X ATR stop on a new position, would be placed 22 pips away from our entry. Using a positive risk reward ratio we can then determine our limit levels. A 1:2 Risk/Reward setting would mean doubling our ATR , setting initial profit targets at a minimum of 44 pips away.

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com . Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com .

DailyFX providesforex newson the economic reports and political events that influence the currency market. Learncurrency tradingwith a free practice account and charts from FXCM.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.