ATR Channel indicator is an mt4 technical indicator that shows the channel of the average true range of previous candlesticks.
The average true range channel helps in determining the stop loss and take profit levels in trading. The channel high and low represents the average high or low of a specific number of previous candlesticks.
Working of ATR Channel mt4 indicator
A specific number of periods is assigned to the ATR channel indicator in settings. ATR period directly represents the number of previous candlesticks to be used for calculating the average true range.
For example, if the ATR period is 25 then this indicator will get the data of high and low of previous 25 candlesticks. It will use the data to calculate the high and low value of the ATR channel over the current candlestick.
Basically, the ATR shows the average price of previous candlesticks. So a retail trader can use those values to determine the size of stop loss and take profit. A retail trader can also adjust the Tp or SL to a level that lies within the average true range.
This ATR channel mt4 indicator will draw more than one channel to increase the probability of winning.
ATR channel Signals
ATR channel indicator does not provide buy or sell signals directly. But it can be used indirectly. Because it tells a trader about the key levels. For example, the ATR value is 50 pips for the current candlestick then you should not place your take profit level above 50 pips. You should remain within the ATR range.
ATR channels act as support or resistance levels.
- Higher ATR channel period means a strong S/R zone
- Lower ATR channel period means a weak S/R zone
Sell signal
When price will approach the upper ATR channel then sell the currency pair
Buy signal
When price will approach the lower ATR channel then buy the currency pair
To increase the probability of winning in a trade, add the confluence of candlestick pattern. When a bullish or bearish candlestick pattern forms at the bottom or top of the ATR channel indicator in metatrader 4 then buy/sell the currency pair.
Place stop-loss always below or above the candlestick pattern.
The Bottom line
Measuring the average true range and trading within that range will make you a profitable trader. Because you are increasing the probability of winning by adding confluences to your strategy and filtering out bad trade setups.
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