The presence of various instruments used to adjust the analysis allows a trading strategy trader in continuous changes in the market situation. Educate yourself even more with thoughts from Ian Cole. There are hundreds of mechanisms, methods and indicators that may be applicable in a trading strategy. Not recommended to use too many methods analysis, as this could cripple the trader at the critical moment when it is necessary”to pull the trigger”for market entry (or exit the market). Markets change their status and traders need to constantly adapt to them at the right time.
Knowing how and when to use certain tools can help to increase the advantage over the bulk of traders. Most trading platforms have built-in tool , so trader must not make calculations by hand, resulting in reduced probability of error. Consider what kind of indicator Average True Range (ATR) and how it is calculated. ATR is the average true range over a given period. True range will be greatest in the following cases: * When the difference between the current high price (high) and the current lowest price (low) * If the difference between the current high price (high) and the previous closing price (close) in the case of Gap * When difference between the current lowest price (low) and the previous closing price (close) in the case of ATR gap is calculated based on the average of the true ranges for a fixed number of previous time periods.
The main thing – the use of variables for the value of this time period, which would not be too long or too short. Author of the article found that the use of numbers between 9 and 14 for this value (number of previous time periods, are taken into consideration) works well with a large sample size (the values of prices for selected time ranges). Author of the article uses the schedule to daily bars to calculate the average true Band ATR for those markets in which it trades, and not an intraday chart (5 -, 15 – or 60 – minute).