In this video post, I explain to you what is the ATR indicator, and how I use it to set stop loss in my trading.
How to Use The ATR Indicator To Set Your Stoploss:
I hope you have enjoyed this short tutorial. As always, comments are welcomed and encouraged. Cheers!
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Couple of questions popped into my head…
1) At what point do you move your stop to breakeven? At the next time you enter in the trend?
2) Are you typically present when executing trades? Or you’re fine placing an order at a certain price and checking it a few hours later?
1) I don’t shift my stops to break even. Rather I trail my stops when there’s a new structure high/low in the market i can take reference from.
2) I set my orders in advance and will check back later.
Hope it helps!
1) I only shift my stop when it make sense to do so. Meaning if price ever reaches my break even price, the chart would invalidate my original setup and i would get out of the trade.
2) I usually place my stop and limit orders way in advance, i don’t have to be present when executing it.
Hope that helps!
When you place a pending order, does the stop loss you set is based on current ATR?
Thank you 🙂
Yes I use the current ATR values when placing my initial stop loss.
Dario here from the UK. Do you always use the ATR for stop losses on all occasions?
Yes, generally I use that approach.
Thanks for ATR. Understand better.
I saw your vide last few months. Kind of forgotten
What do you mean 1R 2R? Can kindlt explain it.
hi ! rayner,
is good to set a stop loss to prevent the further crisis, but suddenly l’m come out this thought, every time while we entry to the market we set 2 atr stop loss. but how we avoid our trade from the stop hunter from broker. some time while we place the stop, it could be just slightly drop a bit our stop loss . then in come back and goes up again .
Thank you !
Hello Tet Soon,
2 ATR stop loss is not a fool proof method. There will be times when price goes against you and then go in your favor once more.
This is trading and there’s nothing much we can do about it, except to accept this fact.
Of course you can widen your stop loss but you will reduce your position size accordingly.
THANKS . SO INFORMATIVE
You’re welcome, glad it helped! 🙂
Thanks Rayner for all your patience to explain for each one again and again.
God bless you!!
Thank you for your wishes.
Don’t hesitate to let me know if you’ve got any questions, I’ll be glad to help.
In one of the sections, you recommended that we should not risk more than 1% of our account. However by using this method, i am risking more than 1% of my account.
What do you recommend?
There’s no fixed rule here, 1% works for me because I can accept the risk.
If that’s too much for your account you can:
1) Increase it
2) Find other products to trade like spot forex that has nano lots.
I hope it helps.
Could you please tell me what the line on your chart are there moving averages.. the one which you shared in starting of the video .. the blue line and the red line
The red line = 20 EMA
The blue line = 50 EMA
Hope that clears up 🙂
You say that you risk only 1% of your capital at each trade. Then how do you make money by risking only 1% of your capital as even your investment make 100%, you only earn %1. You need to find a lot of trades with very handful gains and that’s not possible.
For a $100k account, I’d risk $1000 on each trade.
Assuming a gain of 1:3 risk to reward, I’ll make $3000 on the trade.
Rayner great video on ATR I notice that you don’t use the 14 period, but a 20 why is that?
There’s 20 days in a month, so I use 20 period ATR.
But honestly, it’s not going to make much of a difference…
Rayner, great strategy! Do you use 1 min or 5 min chart for this trend strategy?
The lowest I go is the 1-hour timeframe.
Dear Rayner, Requesting you to provide maximize option for videos, video screen is very small , not able to view the chart clearly.
You can click the youtube button below and watch it on youtube.
Just one short question.
Let’s saying I’m having a pending buy stop order above the current price (1.1000) for about like 20 pips away (1.1020) and the ATR indicator is showing a value of 40 pips.
So based on your formula, 40 pips * 2 = 80 pips and would my stop loss be at “1.0020” or “1.0040”?
Well, I know that there’s no right or wrong in trading but your advice on this would much be appreciated. Thank you.
If you’re using 3 ATR, then it would be 120 pips away from your entry price.
But will it be on based on my buy stop price or the current price?
It’s based on buy stop price as that will be your entry price.
Can I ask whether this will work for Stock?
N is that how u derive your TP price also? Assuming u know the RRR n multiple from there.
The principle works for stocks.
I don’t use this to set TP only for stops.
Do u happen to have video on setting TP?
I don’t have such a video. Will look into it!
Hi, great video but sorry i am newbie and confused. On 1st chart, you calculate the ATR based on your candle entry point (directly below it using horizontal line). But on 2nd chart, you calculate the ATR on most right of the ATR, not in line with candle entry point. So which way is the correct one? Thanks
Calculate the ATR based on the most recent candle.
What if you do trench buying let say I bought the stock 3 times on 3 different time frame. How do you use the ATR?
The same concept applies the same.
Use the ATR on the timeframe you’re trading.
Hello master Rayner,
still don’t understand how to set SL using 2ATR. how to measure it from those ATR?
Read the value from the ATR and add/subtract accordingly.
The values are the same as how you would read the price of a Currency/stock.
Thanks a lot sir
Hi, Rayner, thanks for your wonderful teachings,it is awesome it has opened my understanding more on forex.Please the link you gave for down loading HOW TO ATR INDICATOR TO SET STOP LOSS is not working , how do i go about it? Remain blessed.
You are most welcome!
You can access the video through the link below…
Just need to know, Which is the appropriate way to place the stop loss:
1. 2ATR below the entry price or
2. 2ATR below the entry trigger candle
Recently my stop loss got hit in 1st method
Check out this post…