Hello I would like to start using the average true range for stop losses but im not really sue how it works. If a price for example is at 1.50000 and ATR says 0.0010 does that mean I should set my stop for 1.49900? also do you know any good methods for combining ATR with RSI. thank you
Its not a bad idea to use ATR as a measure for setting your SL and also adjusting it as price moves - volatility doesn’t stand still and what looked like a major price shift at the start of a trade’s life can end up being just a bit of noise after its been running a while.
You need to select your ATR period - so it is average true range across the average of the last x periods. 20 is a popular period. Setting the SL at ATR20 from entry means you will be stopped out if price moves an average range amount as measured over the last 20 periods. If this is too tight, shift the SL to 2 x ATR20 from entry.
You can also use ATR as a sense-check on where your SL is set. So you might put the SL for a long trade just above a lower support level - but if that is less than 1 or 2 x ATR20 from entry, then its increasingly likely you will be stopped out just by price noise.
I’ve only just started seriously looking at RSI, can’t comment on relationship with ATR.
Why do you say 0.0010 is 100 pips?
For somebody with two topics and two posts and obviously no clue you sure do have some attitude.
@tommor was trying to help you.
Come back with a little humility and maybe you’ll get somewhere.
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I apologize for being rude that attitude was uncalled for , I’m just really frustrated because I keep getting stop out of trades before they end up going in my favour and I thought an Atr could help with my entry setup. Again I’m sorry for being rude i didn’t mean to take it out on tommor I just want to know if 0.0010 represents 10 points or 100 points
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Hi.
Fair enough. Happens to the best of us at times I guess.
You just need to know whether your trading platform is displaying the value of ATR in actual pips (four decimals) or if it’s showing the value including fractional pips (five decimals).
As an example and using MetaTrader 4 (EUR/USD):
Yesterday’s ATR(14) value was 0.0046 and the daily closing price was 1.11653. Here you can clearly see that ATR(14) is being displayed with four decimals but the price is being displayed with five decimals (fractional pip pricing). So in this example: ATR(14) is actually 46 pips. So you would simply multiply 46 by whatever factor of ATR(14) you are wishing to use e.g. 1.5 for your stop loss.
But on a platform where the indicators are being calculated without rounding to five decimal places and using the above figures as an example: ATR(14) may be shown as 0.00468 for example. That is NOT 468 pips but rather 46.8 pips.
I hope the above is clear. If not: ask again.
Regards,
Dale.
P.S. Your values for yesterday may differ i.e. it’s largely broker and timezone dependent as to what the closing price of the daily bar was yesterday.
P.P.S. In answer to the last part of your initial question I’m not sure what you’re asking. ATR and RSI have nothing to do with each other (well other than the fact they they were both developed J. Welles Wilder back in 1974), If you’re asking for an RSI based trading system there are probably thousands. But beware: while just about everybody around these parts will disagree with me RSI is not the greatest of indicators when it comes to FOREX. Furthermore: most people don’t take the time and go to the trouble of actually learning exactly what information RSI is showing you. But that’s a whole other thread. In short: there’s really no such thing as overbought and oversold in FOREX. And that’s just to begin with. And mainly that’s what RSI shows. It’s strongest signals are failure swing highs and failure swing lows. RSI was developed for trading commodities and works a treat on equities as well. Many reasons for this but I’m guessing you’re not interested in equities so I’ll leave it at that.
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I have noticed that. There is some people in the forum that instead of being humble and able to have a conversation, they come with an attitude.
Yeh. No big deal though I guess. In this case the dude is probably just frustrated at getting stopped out all of the time. We all know what that’s like.
All good.
interesting discussion. continue friends.
Fabulous post Dale.