Average True Range (ATR) Channels indicator is based upon the Average True Range (ATR) indicator and the Moving Average indicator. The ATR is a measure of volatility - fluctuations in price. Greater the fluctuations in price,greater is the value of ATR. ATR Channels consist of three upper bands and three lower bands with the Moving Average in the center.
The ATR channels cannot predict direction of the move, but are very useful in determining breakouts.When the ATR bands are narrow, the markets exhibit low volatility and there is a high probablity of a breakout on either (BUY or SELL) side.ATR channels are useful for calculating stop-loss levels and position sizing. When entry price from
ATR channels is farther, it means that instrument exhibits high volatility, and therefore the trade size can be reduced. Traders also typically place stop-losses (trailing) stops close to the ATR bands - typically below the lower ATR band for LONG trades, and above the upper ATR band for trades.
The ATR channels cannot predict direction of the move, but are very useful in determining breakouts.When the ATR bands are narrow, the markets exhibit low volatility and there is a high probablity of a breakout on either (BUY or SELL) side.ATR channels are useful for calculating stop-loss levels and position sizing. When entry price from
ATR channels is farther, it means that instrument exhibits high volatility, and therefore the trade size can be reduced. Traders also typically place stop-losses (trailing) stops close to the ATR bands - typically below the lower ATR band for LONG trades, and above the upper ATR band for trades.
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