What is the Average True Range (ATR) Indicator and How to Use It as a Professional Bitcoin Trader

In this article, we will discuss what the ATR indicator is, how to use it, and how to set stops with ATR, as well as how to set trailing stops with ATR. Here’s what you need to know about the ATR indicator…

What is the ATR Indicator?

The ATR is an indicator used to measure volatility in a given market or currency pair. The indicator does not provide information about price direction, but rather measures volatility over a specified period. The general period used is 14 units. The indicator tracks closely to the flat trend. An increase in the indicator’s value is expected during upward or downward movements.

How to Use the ATR Indicator

Setting Stops with ATR

ATR ExampleThe above image is an educational study, and trades should not be entered using only ATR.

An investor who believes that the price has dropped to a certain level will purchase after receiving confirmation from various sources. When setting a stop, it is necessary to consider how volatile the currency pair is.

Since the ATR value in the purchased candle is 0.13, our investor sets a stop loss 0.13 units below. In the next candle, the price collects the above and below liquidity. Our investor, who sets a stop using ATR, knows that the currency pair is volatile, so they set a close stop, and it is seen that it reaches the desired profit target without being unnecessarily stopped out.

Setting Trailing Stops with ATR

Trailing Stop ATR

Another use of the Average True Range indicator is the trailing stop method.

First, the ATR multiplier to be used must be determined. If it is set to a minimum of 1.2, there will be no unnecessary stops in volatile markets. Below, a stop is set using a 1.4 ATR multiplier. The trailing stop worked very well in response to the selling that came from the new peak point of the price.

Trailing Stop ATR

The point to be noted is that the ATR multiplier should be determined according to the time frame to be examined. In other words, the ATR value on a 4-hour chart may differ significantly from that on a daily chart. Therefore, an ATR multiplier suitable for the time frame selected for the trade should be chosen. A range of 1 to 2.5 can be used for short-term trades, while 2.5 or higher can be used for long-term trades.

Don't forget to enable notifications for our Twitter account and Telegram channel to stay informed about the latest cryptocurrency news.

Latest News

PEPE Price Struggles Below $0.00001000 Due to Weak Market Demand

PEPE, a notable memecoin, is currently facing...

Bitcoin Investors Confident: 81.6% Believe Bull Run is Far from Over

The recent decline in Bitcoin (BTC) and...

Bitcoin Faces Potential Drop to $50,000 If Critical $57,800 Support Fails, Warns Analyst Justin Bennett

Bitcoin's inability to maintain the $57,800 support...

Bitcoin Fees Dip 18.25% While Price Struggles Amid Low Trading Volume

Bitcoin network experiences a significant drop in...

PRO Analysis

FLM Coin: In-Depth Analysis and Future Price Predictions of Flamingo Finance

Flamingo Finance, a DeFi platform built on...

Covalent (CQT) Coin: Comprehensive Blockchain Data Analysis and Future Price Predictions

Covalent emerges as a groundbreaking software integrating...

MOCA Coin: An In-Depth Look at Its Potential and Latest Price Analysis

MOCA Coin, LayerZero v2 protokolünde geliştirilen ve...

Ethereum Price Analysis: Potential Drop to $2,700 as Resistance Holds Strong

Ethereum's price trajectory has seen significant volatility,...
Lucien Renard
Lucien Renardhttps://en.coinotag.com/
Lucien Renard is a 24-year-old writer specializing in cryptocurrency analysis and price action. With a focus on technical analysis, Lucien provides valuable insights into market trends and potential opportunities for investors.

What is Gate Learn and How to Buy GLN?

The cryptocurrency market continues to evolve, making waves with significant developments. Investors are keenly exploring new opportunities to diversify their portfolios. ...

What is Gate.io and How to Buy GATE?

The world of cryptocurrency trading is constantly evolving, offering new opportunities and strategies. Copy trading has emerged...

What is MCG and How to Buy MCG?

The highly anticipated "Lock & Earn MCG" initiative is set to debut on Gate.io's HODL & Earn platform on July...