ATR Channels indicator

Description

ATR Channels indicator belongs to the category of trend channel indicators. The price chart of a currency pair displays several price channels that are plotted using moving averages and the ATR value.

The forex ATR Channels indicator settings allow you to assign a specific coefficient to each price channel, which makes it possible to narrow or expand each channel separately.

What is the ATR Channels indicator?

Naturally, fluctuating movements caused by market volatility have become an excellent opportunity to build various channel strategies.

However, the classical channel construction has a huge weakness; the channels are static. The ATR channels indicator is a technical analysis tool that builds multiple channels around the price. The channel is drawn, taking into account the market volatility, and has a dynamic value.

The ATR channels indicator is a multicurrency instrument, so the choice of a timeframe depends solely on the trader’s preference. ATR channels can be used on any time frame, so you can easily make the indicator an integral part of both a scalping strategy and a long-term strategy.

Key features and benefits of ATR Channels indicator

The indicator builds a kind of channel from many lines, the boundaries of which act as strong support and resistance levels.

In practice, these lines are used similarly to trading with levels. Namely, it is necessary to trade both on the breakout of levels and their pullback.

The channel direction angle indicates the direction of the trend. If the channel is directed upwards, positions are opened only for buying, and if downwards, only for selling. If the channel is directed horizontally, the market is flat, so it is worth trading on a rebound from the opposite borders of the channel.

It is also worth noting that you can easily place both stop orders and take profit by the channel level.

ATR Channels trading strategy

Let’s discuss the trading strategy based on ATR Channel.

Sell strategy:

• The direction ATR Channel must be pointing downwards.
• The price should close below the upper boundary of the channel after testing it.
• Place the stop-loss few pips above the top line of the channel.
• Your first profit target should be the midline of the channel. You may close the sell position completely once the price reaches the lower boundary of second last channel.

Buy strategy:

• The direction ATR Channel must be pointing upwards.
• The price should close above the upper boundary of the channel after testing it.
• Place the stop-loss few pips below the bottom line of the channel.
• Your first profit target should be the midline of the channel. You may close the buy position completely once the price reaches the upper boundary of second last channel.

ATR Channels conclusion

ATR Channels indicator is a great tool for technical analysis. It can be used to identify trends and the phases of markets. The tool is equally good for scalpers and long-term traders. However, like any other tool, ATR Channel indicator may not always be a winning strategy. Hence, you are advised to use any other confirmatory tool to add further odds of success to your trading.