ATR PRE-ENTRY STRATEGYATR PRE-ENTRY STRATEGY
The Average True Range or ATR is a measure of volatility.
Volaltility = the amount the price of a market moves around.
The highly volitile GBPAUD moves in hughs jumps.
It can move a few hundred pips in a single day.
You can win or loss a bunch of money of the GBPAUD.
EURCHF is a very low volaltility market.
Possibly 50 pips in a single days movement.
You can find this out by looking at the ATR.
The ATR is simply an average of the length of the last number of candles
Most use an average of the last 14 candles which is roughly 3 weeks of the price data of most markets.
That will give us an idea if the market is in compression (declining) or expansion (inclining).
The ATR automatically adjusts for time frame market or market compression or expansion. So it is useful for everything.
Including for determining a valid stop loss or target.
Also how active a market happens to be.
How to use ATR as an pre-entry technique.
I look for a decline in volaltility during a corase of a pattern of consolidation to gauage the compression that is taking place in the market during that consolidation.
The market is like a spring. The more you compreise it the more power it generates when the compression is released.
The decline of the ATR during the consolidation means a bigger explosion in the breakout from the consolidation.
