What is ATR
Why ATR is important in trading
How ATR is measured.
Determining the position size according to ATR
What is ATR
ATR or Average To Range is a measurment of volatility during a specific period it measured the range of movment of a price during a specific period, to calculate it the lowest point during a specific period is subtracted from the highest point of that period also privious period close valuse is subtracted from heighest value as well of the lowest value price has reached and the maximum of those three value is considered the True Range of that period and to get the Average True Range value of a the True Range value of the periods is added and divided by the number of periods. The following link shows exactly how ATR is calculated /turtles-trading-system/position-sizing
Why ATR is important in trading
ATR importants stems of how position size is calculated regarding and the importance of calculating it according to the volatility of the instrument being traded and not according to a fixed percent of trading capital. As in high volatile markets if the ATR is put in consideratin the position could incure a loss easily.
Determining position size according to ATR
After calculating the ATR of a trading instrument the vale of the changes which could occur to a dolllar at a certain period could be calculated by multilplying the ATR by the dollar price of the point of that dollar(tick, pip, etc…)
As an exaple the pip value of 1 standard lot, or 100,000 units of EURUSD is US$10.00 and assuming that the current ATR of EURUSd pair is 0.0028 then the Dollar Volatilyt would be equat to 10 X 0.0028