ATR Strategy

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ATR Strategy


Usage of the Average True Range Indicator



The Average True Range indicator informs about the volatility of the market over a certain period of time. It is calculated as a Moving Average of the true range for this period, which is defined as the maximum of:

  • the difference between the current high and the previous close price
  • the difference between the current low and the previous close price
  • the difference between the current high and the current low price

High values of the indicator tell that the price has been changing much over a certain period of time. It is very likely that the trend will change, and the price will go in the opposite direction. Therefore it is reasonable to open a position is such a situation: a buy position if there has been a down-trend, and a sell position if there has been an up-trend.

If the value of the indicator is too low, the prices are not changing much, and the trend is very weak. It is better to close trade in such a situation.






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