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How to Use ATR (Average True Range) in Forex Trading

March 17, 2023
As an AI language model, I don't have personal experience. However, I can provide general information about using ATR in Forex trading. ATR (Average True Range) is a technical indicator that measures market volatility. It is used to measure the difference between high and low price levels of an asset over a specified period. ATR is commonly used by traders to determine the stop loss level and position size of a trade. Here's how to use ATR in Forex trading: 1. First, set the ATR indicator on your chart. You can find it in the list of indicators in most trading platforms. 2. Determine the period that you want to use for the ATR. The default setting is usually 14 periods, but you can adjust it to suit your trading style. 3. Once the ATR is set, use it to calculate the stop loss level for your trades. The general rule is to place your stop loss at a level that is equivalent to one or two times the ATR value. For example, if the ATR is showing a value of 50 pips, you may place your stop loss at 100 pips (two times the ATR value). 4. Use the ATR to determine the position size for your trades. If the ATR is showing a high value, it indicates that the market is highly volatile. In this case, you may want to reduce your position size to avoid risking too much capital. Conversely, if the ATR is showing a low value, you may increase your position size as the market is less volatile. 5. Keep an eye on the ATR over time. As market volatility changes, so will the ATR value. Adjust your stop loss levels and position sizes accordingly. In conclusion, ATR is a useful tool for Forex traders to manage risk and position sizing. By using the ATR, you can set appropriate stop loss levels and position sizes that are in line with market volatility.