What is the ATR Indicator 19/12/2021

https://www.tradingwithrayner.com/atr-indicator/#what

ATR – average true range / measures volatility (Wilder 1978)

3 methods to calculate ATR:

1. Current High – Current Low (A – today’s range)

2. Current High – Prev Close (B – today vs yesterday)
3. Current Low – Prev Close (C – today’s low vs yesterday)

When to use:
1. A – green candle’s range is larger than previous
2. B – green candle closes higher than previous
3. C – orange candle closes lower than previous

Takeaway: the larger the range of candles, the greater the ATR ; the smaller the range, the smaller ATR

Caution: volatility (ATR) DOES NOT equal trend. Price can trend higher with lower volatility (small candles),
price can consolidate with high volatility (large candles).

S&P – Up trend, lower volatility (ATR)

 RSI (Relative Strength Index) Indicator Secrets

RSI = 100 – 100 / 1 + RS (avg gain/avg loss)

e.g. 10 period RSI RSI = 100 – (100 / 1 + $10 / $1)

= 100 – (100 / 1 + 10)

= 100 – 100 / 11

= 100 – 9.09

= 91

e.g. gain = $10, loss $20

RSI = 100 – (100 / 1 + $10/$20)

= 100 – (100 / 1+ 0.5)

= 100 – 66.66

= 33.34

How to improve my win rate:

Trade with the trend – use RSI (250d) If RSI > 50, uptrend

If RSI < 50, downtrend

Context: stock mkt is best market to use RSI (long-term uptrends, short pullbacks)

How to time my entries with precision:

RSI (10d or 2 wk of data)

Look to buy when RSI is below 30 (current bearish momentum, wait for price break)

Enter when price breaks above prev day hi, or bullish reversal candle pattern

How to better time my exits:

Context: swing trades

Long setups – exit when RSI crosses above 60

Short setups – exit when RSI crosses below 40

How to combine Trading Indicators

Categorize by Purpose – logic behind indicators

1. Market condition
2. Area of value
3. Entry trigger
4. Trade mgt

Market condition
- Trend, range, low/high volatility
- Moving avg
- Avg True Range (hi/low volat)

Area of Value
 Where might potential buy/sell pressure come in?
- Moving Avg

Use: 50 MA compare with price – areas of support or potent buy pressure

- Stochastic momentum indicator – compares a stock’s closing price to its range of price over time

Use: when price is below 20