This video will show you a way to use the Average True Range (ATR) to filter trade signals for a trading system. It is an application of a free trading lesson in an Average True Range report by Marcille Grapa.
The Average True Range (ATR) is an indicator that was developed by J. Welles Wilder, Jr. who introduced it along with a few other indicators (Parabolic SAR, RSI and the Directional Movement Concept) in his book, “New Concepts in Technical Trading Systems” in 1978.
The ATR was originally designed by Wilder to appropriately measure the volatility of Commodities, an instrument that typically has gaps and limit moves that occur when a commodity opens up or down its maximum allowed move for the session.
Today, the ATR may be one of the oldest indicators that exist but it is far from being obsolete. What’s very interesting about this indicator is its universal and adaptive nature. That’s why it remains applicable and popular among good trading systems and is used with a wide variety of instruments.
Many trading systems use the ATR as an essential tool for measuring the volatility of the market. The Average True Range reveals the volatility in a particular instrument but it does not indicate the price direction.
Any trader who is keen on designing an excellent trading system should be familiar with the Average True Range and the many ways it can be used to improve the performance of any trading system.
The ATR has numerous functions and it’s generally applicable in finding trade setups, entry points, stop loss levels and take profit levels with reasonable money management technique.
Read the full report here: http://www.surefiretradingchallenge.com/average_true_range.html