ATR Bands indicator

21/01/2020 Felix Uncategorized

Many traders will use ATR as a way to determine their stops. It usually works like this:

Stop loss for a short trade = high of last candle + ATR value
Stop loss for a long trade = low of last candle – ATR value

In order to make it easier to visually see where those stops would be, I’ve created an ATR bands
indicator. This indicator will show an upper and lower band around the price, showing where
you can put your stops (or trail them in open positions).

Since a picture is worth a thousand words, here is an example of how it looks:

How Does This Indicator Help Me?

As you might know, ATR is a measure of the average true range of the price, meaning that it is a
way to show the average volatility of an instrument.

So knowing that, we can use ATR bands in a number of ways:

  it’s an easy way to see where you can place your stop loss
 you can use a multiple of ATR as your target
 you can trail your stops alongside the ATR bands

Here’s an example of what I mean:

Features

For now, I’ve added the following features, which can be configured using the indicator
properties:
ATR period

By default, this is set to 24 with the rationale that one day has 24 hours so that way, we’re getting
the average price movement for the past day.

However, it could be useful to have a shorter ATR period, for example if you want to make
recent price volatility more relevant.

ATR multiplier

This is simply a multiplier, so let’s say your current ATR value is 20 pips and you use a
multiplier of 2, then the bands will be 40 pips on each side. By default, this is set to 1 (no
multiplier).

ATR applied to

With this setting, you can choose whether the ATR bands are applied to the highs and lows of
the candles or if you want to use the close price of each candle. Using the close price will
naturally give you slightly more narrow ATR bands.

Bands offset

This is a simple offset parameter, like so many indicators have one. For example, if you want to
have the ATR bands calculated based on the previous candle instead of the current one, you can
use an offset of 1.

Only show for last X candles

With this parameter, you can choose to only show the bands for the last, say, 50 candles. Use this
if you don’t want to have the bands show up on all of your chart and instead only show the bands
for the most recent candles.

TradingView Version
Next to the Metatrader 4 indicator, I’ve also created a version for TradingView, an online
charting platform. You can find the indicator by clicking on the Indicators and Strategies
button and searching for “SFL ATR Bands“.
Download and TradingView link

To state the obvious: I make no claims that this indicator will make you money and I’m not
responsible for any kind of losses you incur as a consequence of using this indicator. That said, I
hope you find it useful.

ATR Bands download.

TradingView version.

By the way, also check out my Daily ATR indicator!

You might also like this: