Average True Range (ATR) indicator
For a modern trader who wants to become successful and receive a stable income from binary options trading, it is important to always look for reliable tools that can increase profits and make trading the most comfortable. The Average True Range (ATR) is one of the popular technical indicators that deserves the attention of market players who would like to achieve better results in trading.
Features of the ATR indicator
Average True Range is a technical indicator that defines the true average range, showing the volatility (i.e. variability) of the market. The author of the tool is the famous trader and analyst Wells Wilder (who also developed the equally popular ADX, RSI, Parabolic SAR).
A detailed review of the ATR indicator
Initially, it was created for commodity markets, but now it has become widespread in Forex and trading. Thanks to clear high-quality signals, it is widely used in trading systems, advisors and indicators, significantly increasing the chances of getting a decent income. The tool studies market volatility: low volatility indicates a sleepy state of the market, high volatility indicates market dynamics. When trading options, it is important to understand the conditions for entering and exiting the market.
Average True Range is the easiest way to identify the average range of the price, its true range. The indicators of the instrument will tell you exactly when you need to enter the market, buy or sell. When working with the indicator, it is worth remembering that it does not provide information about the price reversal, it shows volatility at a particular moment. You can see how the indicator looks on the price chart in the image below:
Advantages of Average True Range
Reliable indicator signals are able to accurately determine:
- Market volatility,
- The scope of the price,
- A change in trend,
- Profitable moments of entry and exit into the market,
- Also, the advantage of the indicator should be considered its reliability and ease of use, due to which it is included in a large number of strategies.
Average True Range indicator signals
ATR Trend Strength Signals
- If the ATR moves sharply in an upward direction, this demonstrates an increase in market volatility, it is worth buying call options,
- If the ATR is gradually decreasing, the market trend is weakening, it is worth buying put options,
- If the ATR is almost straight, “jerks” in a particular direction are possible.
ATR reversal signals
- If the ATR is located at the top for a long time, this signals market consolidation, after which a reversal or continuation of the main dynamics is possible; using the data of trend indicators, you can see a strong reversal signal and, when a downtrend appears, buy put options,
- If the ATR is located at the bottom for a long time, this signals market consolidation, after which a reversal or continuation of the main dynamics is possible; Using the data of trend instruments, you can see a strong reversal signal and an uptrend and buy call options.
How to trade with ATR at Olympus Trade broker
Trading ATR with Binomo Broker
Trading with an ATR trend strength signal
If the ATR moves sharply in an upward direction (which is confirmed in the image below by the Parabolic SAR indicator), this demonstrates an increase in market volatility, it is worth buying CALL options. In the image below, you can observe the upward trend on the MT4 chart:
You can place a CALL bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: up
- Next, click the “buy” button and wait for the results of the forecast:
If the ATR is gradually decreasing, this indicates a decrease in the trend (which is confirmed by the Parabolic SAR), it is worth buying PCI options. In the image below, you can observe the downward trend on the MT4 chart:
You can place a PCI bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: down
- Next, click the “buy” button and wait for the results of the forecast:
Trading with an ATR reversal signal
If the ATR is at the bottom for a long time, this indicates market consolidation, after which a sharp reversal or continuation of the main movement is possible; based on the data of trend indicators (in this case, it is Parabolic SAR), you can track the growth of the uptrend, it is worth buying CALL options.
The image below shows an uptrend (which arose after a long downtrend) in the MT4 terminal (you can place a CALL bet on the binomo.com website, the instructions are listed above):
If the ATR is at the top for a long time, this indicates market consolidation, after which a sharp reversal or continuation of the main movement is possible; Based on the data of trend indicators (in this case it is Parabolic SAR), you can track the downtrend, it is worth buying PUT options.
The image below shows the downtrend (which arose after a long uptrend) in the MT4 terminal (you can place a PUT bet on the binomo.com website, the instructions are listed above):
Downloads
MetaTrader 4 (MT4) platform – download.
ATR indicator for the MT4 platform – download.
Tagged with: Binary Options Indicator
