Resolved Question
How can I use the "daily average true range" of any given currency pair to determine a stop loss?
I find myself using MetaTrader 4 and for the life of me can't find an indicator for anything less than weekly figures. Are the weekly average true range and daily average true range interchangeable? Where can I track down this information or this indicator?
over 2 years ago
Best Answer - Chosen by Voters
Weekly average true range (ATR) and daily average true range are different, with the weekly range being larger than the daily one. You can determine the weekly range by checking the ATR(20) indicator on the weekly time frame. Divide the weekly ATR(20) by two and add to the week's opening price - this is the top of the weekly range. Divide the weekly ATR(20) by two and subtract from the week's opening price - this is the bottom of the weekly range. Follow the same procedure for setting the daily range, except that you should check the opening price for the day and use the daily chart for the ATR(20).
I usually use the ATRs to determine my entry points, especially if they line up with Fibonacci retracement levels or support/resistance levels. The ATRs can also serve as a guide for setting stop losses. I usually set my stop loss 10 to 15 pips beyond the ATRs. For instance, if I entered a long position on AUDUSD on 0.8400 and the bottom of the daily range is at 0.8360, I'll place my stop loss around 0.8350 or 0.8345.
over 2 years ago
Answers (1)
To add to HappyPip's answer, you can also play the break out by buying on top of the range or selling below its bottom while placing your stop loss somewhere within the range.
over 2 years ago
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