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Trade Plans
ATR in trade plans
Last Activity 1/19/2018 2:21 PM
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JIm_in_england

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Subject : ATR in trade plans
Posted : 8/5/2016 12:05 PM
Post #37303

I manage trade plans outside of OT and make extensive use of ATR's

Does anyone have a view as to whether it is correct to adjust stops in line with changes to the value of the ATR or should the stop be kept at the value of the ATR on the day of the trade?
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Jim Dean

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Subject : RE: ATR in trade plans
Posted : 8/5/2016 1:06 PM
Post #37304 - In reply to #37303

I've wrestled with this a lot both in theory and in coding.

I feel that the size of the trade should be a function of the risk being taken.

That risk is measurable usually as ATR.

So if you don't change the size of the trade during the trade ("scaling"), I feel it's usually best to lock in the initial ATR.

There are situations that might call for variable ATR but they are fairly complex.

The cardinal rule is that the stop should never move against the direction of the trade (i.e. Keep it fixed or tighten it as the trade progresses).
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JIm_in_england

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Subject : RE: ATR in trade plans
Posted : 8/5/2016 1:47 PM
Post #37305 - In reply to #37303

Thanks

I am trading the UK market and what I have noticed today is that current ATRs have fallen over the last few days . I presume this is a result of the large falls in the UK market post the Brexit vote have fallen out of the calculation.

As these falls were "one off" and a function of the overall market rather than individual shares and are not really a reflection of the underlying share volatility my inclination is to adjust my stop losses to reflect the latest ATR values.
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