What is ATR?

As for ATR, I have given similar lectures before. You can mainly understand it as an indicator, an important indicator that specifically measures market fluctuations. The greater the market volatility, the greater the value of ATR.

Please observe the area circled by the green frame in the picture above and pay attention to the changes in ATR and exchange rate. We see that as the exchange rate movement slows down, the ATR gradually becomes smaller. ATR reflects this fluctuation in the exchange rate.

We have enlarged the ATR area at the bottom of the AUD/USD chart so that readers can clearly see the corresponding ATR value. In the green area in the figure, the current value of ATR is 0.00285, which is usually read as 28.5 points. This is the fluctuation range of the exchange rate.

Use ATR to select stop loss and set stop loss point

Once investors learn to read ATR, then we can use ATR to set stop loss. On the 4-hour chart above, AUD/USD is trading at 28.5 pips. If investors enter the market at this time, they can set the stop loss to 28.5 points, which is the value of ATR when entering the market.

Of course, investors can adopt a more cautious or aggressive strategy based on their personal trading style, and set a stop loss space with 1.5 times or several times the ATR. For example, last time a client of Jinhui asked me whether it was appropriate for a relatively conservative investor to use 2 times ATR to set a stop loss. Then the stop loss space is 57 points (2 times 28.5 equals 57). A relatively aggressive investor can use 0.5 times ATR to set a stop loss, and the stop loss space is 14.25 points. 28.5 divided by 2 equals 14.25. The above are the basics.

If you need to, you can go to the video library and watch it for yourself. If you are exposed to simulation for the first time, you will understand it by operating and studying it.