News & Analysis at your fingertips.

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. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
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
More View more
Real Time News
  • The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. Learn about the importance of the ISM manufacturing index here: https://t.co/Xr3xtoFpZy https://t.co/j5xDAG6LLb
  • While the meetings of central bankers in the US, Japan and the UK will be front, left and center of traders’ minds this coming week, it would be wise not to ignore next Sunday’s German Federal Election. Get your euro forecast from @MartinSEssex here: https://t.co/m920Uvmngm https://t.co/yQYtfHf66s
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/Dqq9S9vGvo
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/lccPTTlvj0
  • GBP/USD’s consolidation could end soon if price breaks out of a symmetrical triangle in play since July. At this time, a downside breakout is likely following the appearance of a death cross. Get your weekly $GBP forecast from @DColmanFX here: https://t.co/WIKdSesfkJ https://t.co/Fx0qr32xgI
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/IRS9MaA7h8
  • The Federal Reserve rate decision is likely to sway the near-term outlook for the price of gold as the central bank appears to be on track to scale back monetary support. Get your weekly gold forecast from @DavidJSong here: https://www.dailyfx.com/forex/fundamental/forecast/weekly/CHF/2021/09/18/Gold-Price-Outlook-Hinges-on-Fed-Rate-Decision-Forward-Guidance.html https://t.co/dWWxtErjK0
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/arxYmtQeUn https://t.co/4qxwiJsV1K
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/stMPuq0VXR
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/v6RGICQvge
Using ATR to Adapt To Dynamic Conditions in Forex Market

Using ATR to Adapt To Dynamic Conditions in Forex Market

Paul Robinson, Strategist

Talking Points:

  • ATR, an overlooked tool
  • Quickly adapting one’s trading to current market conditions is extremely important
  • Tip for identifying when the trading environment has changed

Volatility, and opportunity along with it, has been declining since the end of January – not exactly what we want to see as traders. But what can we do? The market is the market and we can’t control what it does, however, we can control how we trade it, right? Right. We must adapt, adjust our expectations and tweak strategies accordingly. This means take less out of our winners (and losers, too) as well as be more patient between opportunities. They will come, just in smaller doses. Having had many years of experience trading alongside other professional traders, one thing which always stood out to me was how quickly the best traders were able to adapt to new trading environments. They would go from high gear to low gear and back with relative ease.

What is a good tool for measuring the available opportunity in the market? One gauge traders look at is implied volatility. But what is this? It’s a mathematical calculation which isn’t easily relatable and for comparative purposes we only really understand what is high or low relative to historical. But, what does it mean to us in terms of pips? This is where the use of this simple, yet underappreciated indicator comes in – ATR or Average True Range. I use indicators sparingly, but ATR is one I look at regularly. On a daily chart it measures the average daily trading range over a certain number of days. I generally use a 10-day setting as it is timely enough to be useful, but not overly noisy.

How do I use ATR in my trading?

  • Determine reasonable targets and stops relative to what the market is offering at the time.
  • Look at the direction it is trending and understand that upward means the markets are getting more active, downward is less active.
  • When you start seeing regular daily moves considerably greater than the ATR then it is time to be aware that the trading environment could be changing for the better. When ranges begin regularly falling short of recent ATR readings, it is time to consider adjusting expectations downward.

Below is a graph displaying the average 10-day range of seven key pairs (eurusd, gbpusd, usdjpy, usdchf, usdcad, audusd, nzdusd) – So far, at the peak of 2014 the average daily range (ATR) was 100 pips across these seven pairs. Today, it sits just above 50.

Using ATR to Adapt To Dynamic Conditions in Forex Market

Source: FXCM Marketscope 2.0

In conclusion, if you have been frustrated with the trading activity you’re not alone. But, by adjusting expectations using ATR you will find it easier to handle these inevitable periods of low and declining volatility, ultimately keeping you from making costly mistakes which undermine your profitability. Furthermore, when an uptick in movement begins again, you’ll take notice sooner and be able to take advantage of it longer. Tomorrow, via my blog, I will be discussing why I believe April showers could bring May flowers, seeing some good tradable volatility.

-- Written by Paul Robinson of FXSimplified.com

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

DISCLOSURES