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The ATR Channel is one of the versions of the ATR indicator, which is included in the standard forex set. It is presented in the form of a channel consisting of two non-overlapping moving averages. The structure of work and purpose of these indicators is the same, their difference lies only in visualization. The indicator is used in trading to show the deviation of the price from its average value over a certain period of time, that is, it measures volatility, in addition, due to its average value, it can be used to find the direction of the current market movement, but most often it is used to place stops loss or take profit. The ATR Channel can be used for the same purposes.
The ATR Channel indicator is suitable for use on absolutely all timeframes, with any currency pairs, just like its standard version.
Input parameters
The ATR Channel indicator has slightly more input parameters than the ATR itself. This allows customizing the indicator a little more for own trading scheme. The Colors section in its parameters is responsible for the color scheme and thickness of its lines.
- Calculate On Bar Close - parameter responsible for performing calculations at the close of bars when true is selected. By default, it is set to true.
- Use Median Price - parameter responsible for choosing the average price for making calculations. The default value is false.
- ATR Period - value of the period of the ATR indicator. The default value is 14.
Indicator signals
The ATR Channel indicator is very easy to use. But keep in mind that it does not give accurate signals, so it is recommended to use it with additional indicators or advisers that will more accurately indicate the candle on which to open a position. In turn, the indicator itself is used taking into account finding the current candle relative to the moving average channel, as well as the direction of the channel lines. And with this in mind, a certain position can be opened.
Signal for Buy trades:
- The channel lines are moving up. The current bullish candle should be at the level of balance relative to the channel.
After that, a long position can be opened, which should be closed with a stop loss at the level of the lower channel line, after a bearish candle is formed, on which it can be considered opening a new trade.
Signal for Sell trades:
- The moving average channel moves from top to bottom. The signal candle is bearish, it is at the same distance from the channel lines.
A short position can be opened on the signal candle. Stop loss order should be set at the level of the upper border of the channel. The trade is closed after a bullish candle appears, on which it is already possible to consider opening a trade.
Conclusion
The ATR Channel indicator is very rarely used in trading without additional indicators, advisers and other tools, as it is not very accurate. However, this does not make it ineffective. Thanks to this indicator, it can be very quickly determined the market volatility, the current trend and accurately select a point for setting protective orders.
