ATR Trailing stops indicator helps you to enter and exit from the stock also one of the best indicators that helps you to find stop loss (SL). Exit point.
A big investor always knows where have to enter to the stock, and where have to exit from the stock. but retails investors always confused about it. and this indicator will help you to know where you can enter to stock and where you can exit from the stock.
Also, Traders use this indicator with market trends so that they can earn the maximum amount of profit. see the below picture.
Example: suppose you have brought an X company’s stock and currently X company’s stock trading at $10 and ATR Trailing stops indicator suggest stops loss at $9. if stock price gain to $15 then ATR Trailing indicator suggestion SL will increase. it can be $12( assumed). In one word This indicator suggesting SL will increase or decrease with the stock price.
ATR Trailing Stops indicator setting
Go to indicator section > search For ATR Trailing Stop
Calculation of ATR trailing stops
Let’s have an example: Suppose, X stock 21 days ATR price(ATR means high and low’s difference) . Here 21 days high and low’s difference respectively 5,6,2,6,4,6,2,7,4,1,7,4,3,4,6,5,4,2,3,2,5 .
21 days ATR will be: (5+6+2+6+4+6+2+7+4+1+7+4+3+4+6+5+4+2+3+2+5)/21=4.19
|If we use 1 multiplier||then the stop-loss calculation will be 1 ✕ 4.19=4.19, so this indicator will use 4.19 stop loss (SL) to both sides (upper side or lower side) from the current price, base on market trend.|
|If we use 2 multiplier||calculation 2 ✕ 4.19=8.38 SL.|
|If 3 multiplier||3 multiplier defaults in this indicator, the calculation will be 3 ✕ 4.19=12.57|
|For 4 multiplier||4 ✕4.19= 16.76. so this will be SL from the current price.|
|Formula||Multiplier Number ✕ periods ATR=stop loss. ( one thing you have to understand that you can set the “Multiplier” number base on stock volatility. if the stock price is too much volatile then you can add a high “multiplier” number so that the calculated stop loss will be big. and stock price cannot hit stop loss frequently.|
if the stock price is less volatile then add minimum “multiplier” number is good. It totally depends on you and stocks, how much “multiplier” is good for you. base on stock volatility.
This indicator helps you to both sides. if you buy stock or if you short sell a stock. in both situations, this indicator helps you. But if the stock price is almost flat then this indicator will confuse you. this indicator will hit SL multiplier times in a flat trend.
ATR Trailing Stops Indicator Trading Strategy
The main use of this indicator is, you can use this as a SL price finder. if the market is trending then use this for trail your stop loss.
the increase with the price your stop-loss price will automatically up. so that you can make the maximum amount of money.
Similarly, when the share price is falling and you took the short-selling position, then your SL price will automatically be going down. so that you can earn the maximum amount of profit.
ATR Trailing stops indicator helps you to find exit points of the stock. This indicator generally works fine in a trend. It can be uptrend or downtrend but if the share price is almost flat in this case this indicator will not work properly.
*Read related Post for more information.