How do you read ATR in markets other than forex?

So I have a money management system based on the ATR of a given currency pair and I came to understand that 0.0033 means 33 pips on a non jpy pair and that 0.10 means 10 pips on only jpy currency pairs. but what about other markets ? how many pips on : (XAUUSD) ATR is 1944.714 . And (SPX) ATR is 39.146836

Hi TRiaNO,
The term pips (percentage in points) means “one ten-thousandth” and as far as I know is only applied to Forex where the underlying parameter is a ratio of base currency to the quote currency. So with GBPUSD the base is GBP and the quote is USD and for a given ratio of, say, 1.3000, one PIP is one per 13,000. If the ATR(14) on a five minute timeframe is 10 PIPs, that means that over the past 14 periods (14 x 5 minutes) the average true range of the ratio is 10 PIPs every five minutes (say from 1.3000 to 1.3010).

By comparison, the XAUUSD is the ratio of one ounce of gold to one US dollar, and is also a ratio. The underlying parameter is a ratio too - it is the cost in US dollars of one ounce of gold, say $1,900. Again, on a 5 minute timeframe, if the ATR(14) is 5, that means the average of the last 14 five minute periods variation in price is from $1,900 to $1,905 or to $1,895. This is useful for the purpose of setting a stop loss. Had you set a stop loss of 50 PIPs in the GBPUSD trade, you would be setting a stop loss of $5 per ounce in the XAUUSD trade. That is to say, if price falls below $1,895, sell gold and lose $5 / ounce. For a 1:1 profit / risk ratio you would take profit at $1,905.

For the SPX (S&P 500 index), this is a number made up of a specific proportionate mix of companies on the NYSE. Let’s say the S&P is 3,000 and its ATR(14) over one hour is 15. That means the underlying SPX value (3,000) changed, on average, 15 units per hour during the past 14 hours.

I hope this explains how to make the same comparison. ATR is simply the Average True Range of the underlying number, be it exchange rate of GBP to USD, the price of gold in USD, or the S&P index

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thank you mr Mondeoman it does explain a lot now whats the value of 15 units of SPX ? because i use this formula to calculate pip value in my forex trading: 2%/ ATR 1.5. How do i apply it with XAUUSD and SPX ?

Hi @TRiaNO please don’t take my word for it, because I am not that experienced, but taking a Forex risk value of 1.5ATR is something I have in my notes and may have been recommended on this forum, or elsewhere - I can’t remember. If you think about it though, the number of periods xx (in ATR(xx)) will determine what percentage of trades end up being stopped out and what percentage end up not being stopped out. I have not done this, but if we were to analyze, say, the GBPUSD ATR(9) and ATR (14), we would find perhaps a large variation in some cases and a small variation in other cases, and that has a relationship with the volatility of the ratio in each of the preceding 9 or 14 timeframes (be they minutes, hours, days, etc). There is an indicator called the volatility index (VIX) that I had used in the past to gold and silver price action (circa 2011) that I recently reviewed due to recent gold and silver price action being similarly highly volatile.

If any other member actually trades SPX or XAUUSD, perhaps they can suggest reasonable numbers you may wish to use to analyze your risk / reward ratio success as a relationship to ATR. I just typed “typical ATR of the SPX” into a browser which returned this article on SPX ATR and there is a table of ATR(14) percentage change and how that relates to market sentiment (low volatililty, etc)

Someone will always be able to help kick you off in the right direction, then you become a specialist. The definition of a specialist is somebody who has read up on a topic ten minutes before the layman. :slight_smile:

Wow, just wanted to say great answer.

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The ATR indicator moves up and down with the price of an asset as it becomes larger or smaller. So, the ATR reading can be calculated as each time period passes.