Introduction:
Indicator ATR (Average True Range) Wilder was designed to assess the historical volatility (volatility) of the market and prepare for the next change. These indicators are directly related to the price chart. If the difference between the highest and lowest cost is negligible, candle awakens briefly, the indicator will be low, respectively, if the difference between the highest and lowest price of the candle awakens long, the indicator will rise. It should be remembered that the indicator does not indicate the presence and direction of a trend.
Description of indicator:
The main objective of the ATR indicator is to show how volatile the market and how much the market can move from one point to another within a single trading day. This indicator does not apply to the lead-in other words it does not give accurate signals for market entry, presence, direction and duration of the trend. Despite these facts, the ATR indicator may seem useless, but it is not. The indicator defines one of the most important market parameters - price volatility. Using data indicator trader is stop - orders that directly correspond to the current market volatility.
Application of the indicator ATR:
Trader is stop - orders, SPIRIT volatility. If volatility is large, then you need to place a stop - the order in a wider range, it is done in order to not be "ejected" from the trade random price fluctuations (noise). If volatility is low, there is no need to set foot - orders from a distance.
Example. If you take the currency pair EUR / USD and GBR / JAP, you can put stop - orders for the same distance? Answer: Of course not. Even if the data movement of currency pairs are often the same, that's no reason to put a stop order at the same distance. If you look at the statistics, the average price movement of EUR / USD is equal to about 120 points, and the average price movement of GBR / JAP is 240 - 290 points. On this basis, there is no sense to place stop - orders on both charts at the same distance, it will only lead to the loss of, or at best a marginal profit.
Disadvantages indicator and conclusions:
The main disadvantages are the indicators of false alarms, and because the indicator has no signal, then it can be considered without flaws. This indicator is best used in a stop - orders, but it can also rely on its data in predicting future price movements in conjunction with other indicators. With many years of experience, I can say that this indicator can be easily confused with other indicators, as the same color of the lines, so you should replace them.