Average True Range Trailing Stop
The Average True Range (ATR) is an indicator that measures volatility. This strategy uses ATR to calculate trailing stops to provide buy and sell signals when volatily increases or decreases and crosses the trailing stop.
Using the configurable
ATRX multiplier for ATR, a lower and upper limit are calculated.
- The lower limit, called ATR short, is calculated by substracting the result of
ATRXfrom next rounds bid.
- The upper limit, called ART long, is calculated by adding the result of
ATRXto next rounds ask.
A buy order is placed when the ask price crosses up ATR long.
A sell order is placed when the bid price crosses under ATR short and price is above the break-even point.
As ATR does not provide information about price direction, it is strongly recommended to use an additional momentum indicator like RSI.