Yen Aims to Extend Gains, Pound Focus Shifts Back to Politics.

Gold Prices May Find a Lifeline as Market Mood Darkens. Loonie Slides as Crude Dives- USDCAD Recovery Eyes Resistance.

Volatility Factor - THE OFFICIAL SITE

Gold, USD Highly Correlated and in Confluence. FTSE Further Develops Range on Sharp Turn Lower. Dow Jones Industrial Average Struggles to Hold the Gap Higher. Short Term Strategies, Scalping, Price Action Analysis, and Risk Management. Managing a trade can be one of the most difficult tasks a trader faces. Lucky for us there are a variety of indicators we can use to help in the process!

Our last discussion, March 10 th Chart of the Day , had us implementing a trailing stop using PSAR. Today we will focus on another method, setting fixed stops using the ATR indicator.

ATR Average true range is an excellent indicator found inside of Marketscope 2. The indicator is another creation of Wells Wilder and was designed to measure market volatility. It achieves this by comparing previous highs and lows of a currency pair for a set number of periods.

The greater the difference between these two points, regardless of market direction, the higher ATR will read.

Traders can use ATR to actively manage their position in accordance to volatility. The geater the ATR reading is on a specific pair the wider the stop that should be used. This makes sense as a tight stop on a particularly volatile currency pair is more prone to be executed. As well a wide stop on a less volatile pair may make stops unnecessarily large.

Lets take a look at some examples. A good rule is to place initial stops at minimum 1X the ATR amount for your trade. Above we have a graph depicting the strong downtrend developing on the EURJPY pair for the month of May. We have taken a variety of trades on this pair using many different strategies. One constant that remains the same is that a stop is needed on the position. Reading ATR we can see for this time period volatility has changed.

Currently on the 4Hour graph, ATR is reading 50 and has been increasing.

This means we need to be prepared for more volatility and use bigger stops as opposed to previous levels where ATR held a reading of Finally, ATR can also be a gauge for the placement of limit orders.

Using the 4Hour EURGBP chart above ,a 1X ATR stop on a new position, would be placed 22 pips away from our entry. Using a positive risk reward ratio we can then determine our limit levels. To contact Walker, email WEngland FXCM. Follow me on Twitter at WEnglandFX. DailyFX provides forex news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from FXCM.

A Logical Method Of Stop Placement

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Market News Headlines getFormatDate 'Wed Jun 21 Technical Analysis Headlines getFormatDate 'Wed Jun 21 Gold, USD Highly Correlated and in Confluence getFormatDate 'Wed Jun 21 Education Beginner Intermediate Advanced Expert Free Trading Guides.

News getFormatDate 'Wed Jun 21 News getFormatDate 'Tue Jun 20 ATR getFormatDate 'Thu May 24 Short Term Strategies, Scalping, Price Action Analysis, and Risk Management Connect via: EURJPY getFormatDate 'Fri May 18 EURGBP getFormatDate 'Mon May 14 EURCHF getFormatDate 'Thu May 10 Upcoming Events Economic Event. Forex Economic Calendar A: NEWS Articles Real Time News Daily Briefings Forecasts DailyFX Authors.

CALENDAR Economic Calendar Webinar Calendar Central Bank Rates Dividend Calendar. EDUCATION Forex Trading University Trading Guide. DAILYFX PLUS RATES CHARTS RSS. DailyFX is the news and education website of IG Group.