How to use ATR Stop Loss

Average True Range Stop Loss

Notes:

These indicators and concepts are specifically designed for TradingView.com

How to apply

1. Go to INDICATORS and type in ATR Stop Loss Finder

Stop Loss

‍It's like a safety net for traders. Imagine you buy a stock at a certain price. You can tell your broker to automatically sell it if the price falls to a certain level. This way, you don't lose too much money if the price goes down.

For example, you buy a stock at $50, and you set a stop-loss at $45. If the stock's price drops to $45, your broker sells it for you. So, you only lose $5 per share instead of more.

This stop-loss helps traders protect their money and avoid big losses if things go wrong. It's like saying, "I'm okay with losing this much, but not more."

How to use ATR stop loss

ATR Stop Loss (Long Position Stop Loss Line highlighted in Blue and Short Position Stop Loss Line highlighted in Pink)

There are two lines printed on your chart, a red and a green. The green line is the newly calculated Stop Loss value after applying ATR calculations. The red line is the newly calculated Short position stop loss after applying ATR. If you were to enter a trade using any of the Evolve Algo Strategies, when you apply your stop loss in your broker you will input these values as your stop loss depending if it is long or short.

How ATR stop loss is calculated

ATR (Average True Range) is a technical indicator used in trading to measure the volatility of a security or asset. It is calculated by taking the average of the true range of price movements over a specified period of time. Traders often use ATR to determine the appropriate placement of a stop-loss order. The ATR value can be used to set the distance of the stop-loss order from the current price level, taking into account the volatility of the security. A higher ATR value indicates greater volatility, and therefore a wider stop-loss order is often used to account for larger price swings, while a lower ATR value indicates lower volatility, and a narrower stop-loss order may be used. For example, if the ATR of a stock is 2, and a trader wants to set a stop-loss order at a distance of 2 times the ATR value below the current price, the stop-loss order would be placed 4 points below the current price. This can help the trader to account for potential price swings and volatility in the market, and limit their potential losses if the market moves against them. In short, the ATR indicator can be a useful tool in determining an appropriate distance for a stop-loss order, allowing traders to manage their risk more effectively and avoid large losses.

Reference for other ATR methods

1. Market conditions: ATR stop loss values can vary based on the market conditions, so it's important to consider the volatility of the market and adjust your ATR stop loss accordingly. In highly volatile markets, you may need to set a wider ATR stop loss to account for larger price movements.
2. Timeframe: The ATR stop loss values can differ based on the timeframe you are using. ATR values calculated on a shorter timeframe will result in tighter stop loss levels, while longer timeframes will result in wider stop loss levels.
3. Risk tolerance: ATR stop loss values should be set based on your risk tolerance. If you have a low risk tolerance, you may want to set tighter ATR stop loss levels, while if you have a higher risk tolerance, you may want to set wider ATR stop loss levels.
4. Trade size: ATR stop loss values should be adjusted based on the size of your trade. Larger trades may require wider ATR stop loss levels to account for larger potential losses.