Do we use 2R or ATR to set TP?

Trading Discussion Risk Management Practices
1

Dear traders

Given risk is 2%.Let’s take a look at GBPUSD between 24th Oct 2017 to March 2020.

Set up as followed:Gbpusd [email protected] ,1.32350. Sl 1.33400. Tp 1.30900.

Monthly ATR is about 570 pips.

SL pip is 140pips.

1.43377-1.32 = 0.1177 (1177pips)

Based on this,We have to bear the risk of 16%(2% x 8) - - - - - - >1177/140 = 8+ before taking profit of 2R or more from August 2018. 2R is 280pips. 1.3200-0.028 = 1.292(price reached 1.292 or lower from August 2018)

The price reached high of 1.43377 on Jan 2018. It plummet to 1.14093 on March 2020.

Let’s say we use ATR to set TP level. We multiply ATR 570 x 1 times or more. We get 570pips or more. Price will hit tp from August 2018 onwards.

In short, we use 2R, we get 280 pips, we use monthly ATR,we get 570 which is 4R +

When do we cut loss? Is the price reach 280pips or more then we cut loss? Please kindly advise.

Please kindly advise if I use 2R or monthly ATR to set TP level.

For money management, do we use 2R or use ATR to set TP level?

Thank you very much.

2

The stop-loss price level should really be identified using TA from the chart. So from your example it is 140 pips. Risking a maximum of 2% is a commonly used rule but the 2% means 2% of your account capital.

This means that if your available account capital is £10,000 and you wish to limit your risk to 2% of this, that will be £200. You can now calculate your position size which will equate to 200/140 = £1.42p per pip.

3

Yes, I used to use it once. But don’t use it now. Because now I work with support/resistance. However, this indicator is very helpful.

4

Do you use weekly or monthly ATR? When will you cut loss?

5

I would use a price point that sticks out like a mile.

The market cares not whether you use an ATR or a 2R number.

Find a suitable price point - my suggestion is to use some type of pivot point or fractal pattern.

Such as the lowest low of the past 3 weeks or 5 weeks.

1 Like
6

The ATR indicator indeed is a great approach to read the market volatility in pips. I certainly believe that by knowing the last day’s or even hour’s volatility, won’t provide us enough data for making a wise decision. The ATR indicator on the other hand determines the average of specific sessions.

7

I did not know about this and it feels good to learn something new today.

8

There are so many indicators in the forex market that you might think about using. But you won’t find out which one is the best for you if you don’t use them on your own. Do some research and pick 2-3 indicators that you think will work for you. Test them on your demo account and you will find out whether you should risk your money with them or not.

9

There are better indicators that work more accurately. I now use support and resistance and have been achieving great results. Even moving averages and MACD are better in terms of showing overbought or oversold market conditions.